I need a new place to live, but I'm worried I won't find an apartment because of the debt on my Capital One card. What can I do? – Charles
If I understand your situation and question correctly, it appears that you have a card with which you ran up an unwieldy balance. Now you either want or need to move to another apartment. You're afraid, however, that the debt you currently have is holding you back from being considered an acceptable tenant.
And yes, you'd be right to be concerned. The credit card companies are reporting information about your accounts to the credit reporting bureaus. Many landlords and property managers check these reports to determine if you, a hopeful tenant, would be right for the rental. These documents help them decide if you have been financially responsible in the past, which is certainly relevant to someone expecting rent to be paid in full and on time in the future. If you have paid accounts late, have accounts in collections or owe a judgment, you won't look too attractive. All of those circumstances indicate trouble.
Of course, your debt could have been due to matters that were out of your hands. Perhaps you were laid off and couldn't find another job quickly enough to make sure that your accounts remained in good standing. Unfortunately, to someone renting you a home, even that might be somewhat irrelevant. You're a stranger to them, and your credit report is talking loudly. It's shouting, “I did not pay my bills as I should have,” and that's a massive red flag.
Another warning sign to a landlord would be you simply owing a lot of money. Even if you've been paying your creditors perfectly on time and have kept all your accounts out of collections, an especially large debt can indicate that too much of your paycheck is already promised to others.
For example, let's say you take home $4,000 per month and the rent for the home you want is $1,500. With such an income, it would seem like you'd have enough coming in to pay that, plus expenses, with little trouble. Unless, of course, you are paying a large sum to your credit card companies each month. Maybe your minimum payments alone are $1,500. In that case, you would only have a $1,000 cushion for food, utilities, gas and other necessities. The landlord, therefore, may very well consider you too much of a risk.
So what do you do now? If you have some time before you have to move, great. Use it to delete the debt to a reasonable amount. Your goal should be to afford the rent, credit card payments and all of your expenses with no trouble. This is not just for the landlord's benefit, but for your own peace of mind. You want to be sure that you're not struggling to cover all of your bills each month.
On the other hand, if you're being rejected because of delinquencies and other negative items on your credit reports, prove that the past is in the past. Tell the landlord that you messed up, but you've changed for the better in specific ways. Perhaps you've paid on time for the past six months. Point that out.
If your debt problems occurred because of an event that was out of your control, I also suggest adding a 100-word statement to your file. That statement will appear every time a landlord (or anyone else) pulls your credit report and is your opportunity to describe what happened on paper.
Each of the three credit bureaus has its own policies for adding a personal statement:
Have no good explanation for your money and credit issues? Warn any potential landlords that they may see something they won't like, and ask them to give you a chance anyway. Offering a larger-than-requested security deposit or paying a few months' rent in advance can work wonders.