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What is a Letter of Credit and Why You Might Need One to Rent an Apartment

One of the many things landlords will check when you want to rent an apartment is your Credit score. They want to make sure you can afford the monthly rent and that you will pay it on time, every time. That means finding out what credit card accounts and outstanding balances you have, whether you have student or car loans and whether you've ever declared bankruptcy.

If you have a low credit score, you can sometimes boost your chances of becoming a tenant if you attach a Letter of credit to your rental application. Here's what you need to know and do to put the odds in your favor.

Why you should explain your low credit to a landlord

Most credit scores range between 300 and 850, and landlords like to see that you have at least a 670. If you fall below 580, it might be more difficult to snag an apartment lease. That's because a poor credit score or other blips in your credit report could signal to a landlord that you struggle to meet your financial commitments.

While landlords use different criteria to determine whether to rent a unit, a lower score could eliminate you from the running. But you're not alone. Many people's credit scores have suffered for all kinds of reasons.

You can turn things around by writing a letter of credit for rent. Often used when renting commercial properties, this type of document can also be a simple letter from you to your landlord, explaining why your credit score is low. For example, maybe you were unemployed temporarily and had to max out your credit cards, but now you're actively working to improve your credit score. Landlords are aware that everyone falls on hard times occasionally. They might appreciate your honesty and determination to repair your financial footprint.

Do your homework

To address any concerns a landlord might have about renting to you, you'll need to read and understand your own credit report. Start by requesting a copy from a credit-reporting agency. You can get one free copy from Equifax, Experian or TransUnion each year. When you receive the report, review it for potential issues, including high credit card balances or missed loan payments.

What to include in your letter to explain bad credit

In your letter, be honest and transparent. Acknowledge your low credit score and explain why, sticking only to the facts. Be specific. If you had unexpected medical expenses, went through a divorce or had to leave your job to care for a sick relative, provide those details. If you were laid off temporarily due to the pandemic, include that information, too. You can also mention how much you learned about financial responsibility and how you intend to overcome any issues.

Focus on what you're doing to improve your credit, such as a new job you just started or a new payment plan you've negotiated to pay off your student loans. Be sure to mention how you plan to repair your bad credit and state your intention to pay your monthly rent on time. Most landlords will be sympathetic to the financial challenges you've faced, especially if they believe you are working hard to stay on top of your expenses.

Mention how much you like the apartment, the building and the community to show that you value the property and plan to be an excellent tenant. Include as much information as possible in your rental application to reassure the landlord that you have good intentions. For example, make sure you attach proof of income and several good references from your supervisor and former landlords.

Leave a good impression

Keep the lines of communication open by encouraging the landlord to contact you with any questions. This is your chance to convince the landlord to review your application with an open mind, despite your past credit problems.

If you recently took specialized training for work or received licensing for a new trade, mention that in closing. It shows you're determined to improve your overall financial situation.

Follow up after you have submitted your rental application to make sure it was received and to show you are eager to be accepted as a tenant.

If you're not sure how best to write your letter of credit, you can follow this template. Stay positive and professional in all interactions with your landlord, and you'll have a better chance at securing your apartment.

The post What is a Letter of Credit and Why You Might Need One to Rent an Apartment appeared first on Apartment Living Tips - Apartment Tips from ApartmentGuide.com.



This post first appeared on Apartment Guide, please read the originial post: here

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