CNBC Select may receive an affiliate commission when you click on the links for products from our partners. Click here to read our full advertiser disclosure.
Advice

Applying for your first apartment? Here's how to get your money in order and ace your credit check

Whether you're a new graduate or just living on your own for the first time, here's how to get your credit score in check for an upcoming apartment application.

Getty Images

Getting approved for your first apartment involves a lot of paperwork. 

Thankfully, most apartment applications happen online, especially since the onset of the coronavirus pandemic. But landlords and property management companies will still ask for your personal information so they can conduct a thorough credit and background check.

Every state, city and apartment complex comes with different requirements, but most rental applications request similar information for each applicant/resident, so they can verify your identity and your ability to pay rent. This will include your personal contact information, social security number, current and previous addresses, employer information and proof of income, emergency contacts and vehicle information (when applicable).

Though it's all basic information, rental applications can still be extensive. If everything checks out — you have a clean criminal record, good rental history (no evictions) and have proven you can afford your new place (whether through income or with the help of a guarantor) — a new home awaits you on the other side.

To help you get there, CNBC Select rounded up a few ways you can prime your credit score and wow your potential landlord.  Of course there are no guarantees, but you can improve your chances of getting an apartment with these four simple tips.

The earlier you get started the better. You want to start preparing at least three months before you know you want to apply for a new place, but six months or more gives you the best advantage. Even if you're not sure where you want to live months from now, taking these steps will help you confident about your application when you finally do find your place.

1. Know what's on your credit report ahead of time

There's nothing better than turning in a rental application knowing exactly what your prospective landlord will see when they run a credit check. And since you have to act fast when applying for an apartment, be prepared and confident by knowing the ins and outs of your credit report ahead of time.

Before you start apartment hunting, visit AnnualCreditReport.com and download your free reports from each of the three main credit bureaus: Experian, Equifax and TransUnion. Through April 2021, you can download all three weekly for free.

Once you download your report, it's important to review it carefully. If you have student loans or any lingering credit card balances, it won't be much of a surprise when you see them. You'll also see your credit score, which you may already know.

However,  you want to look out for negative marks you didn't know about, and then take the time to dispute errors and repair your score if necessary.

Once you review your credit report, sign up for a credit monitoring service that scans your credit accounts for activity and helps you track your payment progress, any changes to your accounts, score updates and more.

CreditWise® from Capital One is a free credit monitoring service that doesn't require you to enter a credit card number to sign up and provides a great range of features. Likewise, Experian offers a free credit monitoring service with a variety of helpful benefits like real-time alerts for changes to your personal information and suspicious activity detected on your Experian credit report.

Experian Free Credit Monitoring

Experian Free Credit Monitoring
Information about Experian free credit monitoring has been collected independently by CNBC and has not been reviewed or provided by the company prior to publication.
  • Cost

    Free

  • Credit bureaus monitored

    Experian

  • Credit scoring model used

    FICO

  • Dark web scan

    Yes, one-time only

  • Identity insurance

    No

See our methodology, terms apply.

2. Improve your credit score

To best prime your credit score, it's important to know how it's calculated. The most popular FICO score model looks at five key factors:

  1. Payment history (35%): Whether you’ve paid past credit accounts on time
  2. Amounts owed (30%): The total amount of credit and loans you’re using compared to your total credit limit, also known as your utilization rate
  3. Length of credit history (15%): The length of time you’ve had credit
  4. New credit (10%): How often you apply for and open new accounts
  5. Credit mix (10%): The variety of credit products you have, including credit cards, installment loans, finance company accounts, mortgage loans and so on

To quickly see a jump in your credit score, pay off as much credit card debt as possible without completely draining your cash reserves. Do this more than 30 days before your application so that your score has a chance to refresh. Paying off revolving credit card debt first improves your total amounts owed, contributing to a healthier score overall.

Read more about how to pay off credit card debt.

You can also take advantage of Experian's free service  Experian Boost™, which lets you add positive payments for phone and utility bills to your Experian credit file, potentially increasing your credit score. If you don't yet have utilities in your name, you can add on-time Netflix payments to your Experian Boost account while you're still living at home.

3. Have a clear picture of your finances

You'll have to show proof of income when you apply for an apartment, which normally means a pay stub and/or tax returns.

But in addition, you should also be prepared to provide statements for both your checking and savings accounts. It's not always required, but it never hurts to show proof that you've got savings set aside for your security deposit and incidentals like facility fees, parking fees and maintenance fee (depending on your landlord/management company). 

4. Steer clear of new credit inquiries

If you can avoid it, don't apply for new credit cards, auto loans or other kinds of credit products right before you apply for an apartment.

When any lender performs a credit check, it leads to what's called a hard inquiry into your credit history. Hard inquiries appear on the credit report pulled by the lender and may result in a temporary decrease in your credit score.

While the decrease is usually insignificant, roughly five points or so, it can send up red flags to potential landlords. Its negative impact decreases over time, despite inquiries remaining on your credit report for two years.

5. Build up your savings

Before you move into a new apartment, prepare for your increased cost of living.

If you have the ability to live rent-free with a family member while working from home, take advantage of it by "practicing" paying your rent in the months leading up to your move. Every month, transfer enough money to cover what your future apartment's rent will be into a savings account. After six months, you'll have a nice emergency cushion and you'll have built up the budgeting muscle to know you can afford your future costs.

For this trick, Ally is a good choice since you can do all your banking in one place. While the Ally Online Savings Account is a good high-yield account on its own, account holders can enjoy even more benefits if they also have an Ally Interest Checking Account. If you have an Ally Savings account, you can create 10 different "buckets" within the same account, organizing your money easily. You can create a designated fund for your security deposit and another called "Emergency Savings" where you can stash those practice rent payments.

Ally Bank Online Savings Account

Ally Bank Online Savings Account
On Ally Bank's secure site
  • Annual Percentage Yield (APY)

    0.80%

  • Minimum balance

    None

  • Monthly fee

    None

  • Maximum transactions

    Up to 6 free withdrawals or transfers per statement cycle

  • Excessive transactions fee

    $10 per transaction

  • Overdraft fees

    $25

  • Offer checking account?

    Yes

  • Offer ATM card?

    Yes, if have an Ally checking account

See our methodology, terms apply.

Pros

  • Strong annual percentage yield on all balance tiers
  • No minimum balance
  • No monthly fees
  • Up to 6 free withdrawals or transfers per statement cycle
  • Option to add a checking account
  • ATM access if you have a checking account

Cons

  • $10 fee per transaction if you make more than 6 in a statement cycle
  • $25 overdraft fee

Ally Interest Checking Account

Ally Interest Checking Account
Information about the Ally Interest Checking Account has been collected independently by CNBC and has not been reviewed or provided by the bank prior to publication. Ally is a Member FDIC.
  • Monthly maintenance fee

    $0

  • Minimum deposit to open

    $0

  • Minimum balance

    None

  • Annual Percentage Yield (APY)

    0.10% less than $15,000 minimum daily balance; 0.50% over $15,000 minimum daily balance

  • Free ATM network

    43,000+ Allpoint® ATMs

  • ATM fee reimbursement

    Up to $10 per statement cycle

  • Overdraft fee

    $25

  • Mobile check deposit

    Yes

See our methodology, terms apply.

Pros

  • Top-rated mobile app
  • No minimum deposit to open an account
  • ATM fee reimbursement up to $10 per statement cycle
  • 0.10% or 0.50% APY, depending on daily account balance

Cons

  • $25 overdraft fee
Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the CNBC Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.