‘œAnd homeless near a thousand homes I stood, and near a thousand tables pined and wanted food.’ ‘“ William Wordsworth

Two weeks ago I wrote about how to avoid homelessness in the event you’ve been hit by a financial disaster.   For most of us, money problems don’t last forever, and eventually circumstances change for the better.   Unfortunately, bad times often translate into negative information on your credit history.   Although it’s possible to rebuild your credit, it can take longer than you’d like.

As I was in the middle of filing bankruptcy and foreclosure, I spent a great deal of time unsuccessfully trying to find a place to live.   Ultimately, I ended up giving up on finding a house or an apartment, and I lived in an RV for almost four years.   When my wife and I grew tired of trailer life, we found that the triple whammy of self-employment, bad credit and pets made the rental market almost impenetrable.   Fortunately, we found ourselves in the beginning of the housing boom, and a mortgage broker was able to get us into a house.

So what do you do if you have a job and you have money saved up for a deposit, but your credit history is bad?   What do you do when you are tired of couch surfing, but you know that potential landlords will give you the thumbs-down once they pull your credit report?

There are several things you can do, both in terms of preparation and search.

Preparation

1.       Lower your expectations.   If you have poor credit, resign yourself to the fact that you may not find your dream apartment.   Be prepared to deal with your second or even third choices when it comes to amenities and neighborhoods.

2.       Be prepared to make hard choices. If you are freelancing, you may need to consider W2 employment to make yourself more attractive to landlords.   If you have pets, you might need to find them a new home.   If my wife and I had been willing to go back to W2 employment and had found a home for my dog, we would have quickly found a landlord willing to work with us.

3.       Put together a rental résumé. Get positive rental references from your previous landlords.   This includes your friends from whom you have been renting couch space.

4.       Document your financial resources. Put together a file that contains your pay stubs and bank records.   If you have any significant money in savings or investment accounts, bring those statements along with you.   When I was in college, I was able to convince an otherwise unwilling landlord to rent to me because I could show that I had several month’s rent in my bank account.   Even though I had no credit history, was new to the area and had no job, the fact that I could prove I could pay the rent for several months changed her mind.

5.       Get a copy of your credit report. Once you have it, you’ll know exactly what’s on your report, and you can discuss this with potential landlords before they run your credit.   Although landlords will likely want to run their own copy if they are serious, you can use your copy as a pre-screening tool to avoid unnecessary inquiries and application fees.

6.       Find a cosigner. Having a cosigner with good credit can often be the magic key to unlocking the door to a nicer house or apartment.   Unfortunately, it’s rarely a good deal for your cosigner, because they end up on the hook if you default on your rent.   Most financial advisers recommend never co-sign a loan, so you may be hard-pressed to find someone who is willing.   If you do find a cosigner, never forget your responsibility to them.   Remember, if you don’t pay your rent, you’ll cost your cosigner money and damage their credit file, as well as your own.

Finding a Place

1.       Look for housing owned and managed by individuals, not property management companies. Although it won’t hurt to call your local property managers, most aren’t willing to approve people with bad credit.   Search your local classified ads, grocery store bulletin boards, and local online communities. If you work with landlords who personally manage a small number of properties, they are less likely to run a credit check or demand perfect credit if they do.   They may be willing to take a chance on you, especially if you can prove you have sufficient income and assets.

2.       Be honest with potential landlords. Don’t try to hide or sugar-coat your negative credit history.   Be forthright, and try to address concerns head on

3.       Offer to make a larger deposit, pay higher rent, or pay in advance.   Although this will cost you more, sometimes landlords will be willing to ignore your bad credit if they know that they won’t be out any of the rent money.

4.       Look at places that cost far less than what you can afford. A nervous landlord may be more willing to consider you if the rent is far below your means and he or she knows you have a cushion in your budget.

5.       Rent with a friend. If you can’t get approved on your own, see if you can rent with someone who has a better credit rating.   A landlord may be willing to overlook your shaky credit knowing that someone else with strong credit history will be on the lease with you.

6.       Rent a room in someone else’s home. Although this might not be your first choice, you may be able to convince someone to rent to you without a credit check.   This will buy you time to improve your credit history and give you a positive rental history as well.

Once you’ve found your new place, treat your rent obligations as a sacred cow.   It’s hard enough to find a place with poor credit.   If you have been evicted for non-payment of rent, it can be next to impossible.   Keep your rental history squeaky clean if you can, because it will only make your financial recovery easier.

Next in Series: A Surprising Blast from the Past

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