How to secure an apartment when you have bad credit

January 4, 2017

Washington Post

How to secure an apartment when you have bad credit

By Michele Lerner

Many renters, particularly first-timers, have a thin credit file or completely lack a credit history, while others have bad credit.

When these renters have a difficult time getting approved for a new rental unit, they risk being denied access to a place they want to rent or must ask someone to co-sign their lease. In some cases, they are required to pay a higher-than-normal security deposit to compensate the landlord for taking on the risk of renting to someone without a proven payment history.

LeaseLock, a new insurance product for the rental housing market, aims to solve this issue. According to LeaseLock, one-third of all renters are high-risk, whether it’s because they are students or recent grads or people new to this country without a credit history or because they have bad credit due to a job loss or foreclosure or other life event.

LeaseLock uses proprietary financial technology to evaluate the risk of these rental applicants by reviewing their full finances, past rent-payment history and other indicators beyond their credit score. If the applicant is approved, they can pay the LeaseLock fee and be approved for the lease.

The one-time, upfront fee costs between 10 to 13 percent of the total lease amount. For example, if an apartment rents for $1,000 per month ($12,000 annually), the fee would be $1,200. Alternatively, renters can pay 5 to 7 percent of the total lease amount upfront and pay the rest in monthly installment payments. A $29 nonrefundable application fee is also charged.

Once the fee is paid, LeaseLock converts it into an insurance policy that protects the landlord for the full value of the lease in the event of a default. The company will pay the landlord a rent check every month until the lease expires or the unit is rented again.

LeaseLock chief executive and founder Reichen Kuhl says landlords benefit from this protection and from the ability to approve more leases, while renters benefit because LeaseLock reports their on-time rent payments to the credit bureaus.