F-1 Renting: What to Do If You Don't Have Enough Credit?

This article explains how credit scores are calculated, the factors that affect them, and how to address issues with insufficient credit when renting a home.

In the U.S., credit scores are extremely important to an individual. Whether you are buying a car, renting an apartment, or applying for insurance, your credit score will be examined. A higher score indicates better creditworthiness, making it easier for you to get approved for credit cards and loans. It can also help you get lower interest rates and more benefits.

The most commonly used credit scoring model in the U.S. is the FICO Score, developed by the Fair Isaac Corporation. Approximately 90% of major banks and loan institutions in the U.S. use the FICO score as the standard for evaluating individual creditworthiness.

Credit Score Ranges

• Below 580: Considered Poor

• 580-669: Considered Fair

• 670-739: Considered Good

• 740-799: Considered Very Good

• 800 and above: Considered Exceptional

A score between 670 and 739 is roughly equivalent to the U.S. average, indicating a decent credit standing. A score of 740-799 is above averag, reflecting a reliable credit history. Those with scores above 800 are considered to have excellent credit and are likely to receive the best rates and offers.

Factors That Determine Your Credit Score

• Payment History (35%): This is the most important factor, determined by whether you make your credit card payments on time each month.

• Amounts Owed (30%): This refers to the total amount you owe across all your credit accounts and the percentage of your total credit limit that you are using. A lower credit utilization ratio typically leads to a higher credit score. If your debt exceeds 10% of your credit limit, it will negatively affect your score.

• Length of Credit History (15%): A longer credit history is better, as it shows that you have been responsible with credit over a longer period.

• Credit Mix (10%): This considers the variety of credit accounts you have. Having a mix of different types of credit, such as credit cards, mortgages, and auto loans, can boost your score if you manage them well, as it indicates your ability to handle different types of accounts.

• New Credit (10%): This factor is related to the number of new bank accounts you have recently opened. Every time you apply for a new credit card or loan, the lender conducts a "hard pull" on your credit report, which can affect your score. Multiple hard inquiries within a short period can lower your score. On the other hand, checking your own credit score or undergoing background checks by an employer involve a "soft pull," which does not impact your credit score.

Tips for Enhancing Credit Scores

• While paying off bills in full at once is a common practice for some, this approach does not necessarily boost your credit score. For example, when buying a car, it is better to make a larger down payment but leave some balance to pay off in installments. By consistently making timely monthly payments on this remaining balance, you can effectively enhance your credit score.

• Do not wait until the payment deadline to pay off your credit card. Equally important is avoiding maxing out your credit limit. For instance, if your credit limit is $1,500, consistently using and paying off $500 will be more beneficial for your credit score than using $1,499 and then paying it off. This is because banks consider not only your credit limit but also the percentage of that limit that you are using.

Renting Without a Sufficient Credit Score

If you find your credit score insufficient when renting, consider these solutions:

1. Provide your current credit score along with proof of assets to demonstrate your ability to pay rent. Generally, the required amount should be 3-5 times the monthly rent.

2. Offer a guarantor’s credit history and proof of assets to ensure that the guarantor can cover the rent if you are unable to pay.

3. Apply to the rental office to prepay 2-3 months of rent as a deposit.