It is common knowledge that a bad credit can give you a tough time when you want to get approved for a car loan or a SBI home loan. But did you know that it is equally difficult to rent a house if you have a bad credit history. Landlords want to ensure that the potential tenant is a trustworthy person who pays his bills on time. A look into the credit score helps them decide whether to agree or deny giving the property on rent to the concerned individual. So how can you overcome a bad credit problem while you are looking for a house on rent? Here are 5 tips that will help you qualify for a rental.
In order to win the trust of the landlord, you would need to give him an assurance that he will receive his monthly rental on time. If a trusted friend with a good credit history and a steady income co-signs the rental agreement with you, the landlord may accept your application. A co-signer will not live with you in the apartment but will be legally responsible to cover the payment in case you default on rent. Remember co-signing will alleviate your landlord’s concerns but increase the risk for the co-signer. So be sure of your capability to afford the rent of the property. Non-payment might strain your relationship with the co-signer.
A low CIBIL score increases the risk of the landlords as it indicates that you may default on rent. Offering a larger security deposit shows that you are committed to making payments diligently. It also gives the landlord enough money to cover for the losses in case you skip a payment.
Another way to win the trust of the landlords is to pay a few months' rent upfront. This will show that you are dedicated to become a good tenant and help you seal the deal. You will need to save up money to pay the rentals in advance. But if you can do so the landlord may be ready to ignore your low CIBIL score.
Even if you have a shaky credit profile, you may still be able to convince the landlord by showing that you earn a regular and high income that can easily cover up for the rental amount. Show income proofs like recent pay slips, tax returns and a letter from the employer confirming your employment status and income level. A high income minimises the risk of missed rental payments. You may also reduce the anxieties of the landlord by offering to make an automated transfer every month from your bank account.
A low CIBIL score isn’t always a sign of financial irresponsibility. Sometimes a job loss or a medical problem can be a reason why your finances went out of control. If you know that your landlord is running a credit check, be honest and upfront about your situation. You may own up your mistake or state the reasons why your score went down. You should also mention the measures that you have taken to improve your score. Show that you are committed to pay your debts and bring all accounts current.
If your potential landlord does a credit check and turns down your application because of a low CIBIL score, recommendation letters can come in handy. Letter of recommendation that vouch that you are a responsible person will help in reassuring the lender. Your previous landlords, employers and current employer are some people whose reference letter will hold value, as these are the people with whom you have had financial relationship. A letter from the previous landlord stating that you had an impeccable track record of paying rent on time will reduce some negativity around you.