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Don’t let renting ruin your credit rep

Buying a home comes with its own credit challenges, but renting has its booby traps and ambushes, too.

Sometimes landlords keep security deposits for no good reason, or require security deposits that are unfairly high.

Hunting for a rental can generate multiple credit report inquiries that can lower your credit scores. And if your credit stinks, you might not even be able to get a rental.

Whether you expect to rent for a while or want to buy a home within a couple of years, you need intel to succeed — the side with the best intelligence wins.

Here are a few issues for renters to consider:

Your credit counts. Most landlords and property management companies will want to see your credit, but private landlords who own just a few properties are not as likely to consider your credit. Keep that in mind. If your credit scores are low and you can’t persuade a landlord to rent to you, consider offering a larger security deposit.

Avoid multiple credit inquiries. When calling potential landlords, ask if they will accept a recent copy of your consumer credit report. That way, you can avoid multiple inquiries that affect your credit scores (your own request won’t affect them), and it might save you the $15 to $30 a landlord could charge to run your credit report.

You can easily obtain your own consumer credit reports. Do not pay more than $25 to $30 for your triple credit reports (also called “tri-merge” or “three-in-one” reports) with scores. They are easy to get online; I suggest going to one of the three major credit reporting agencies’ Web sites: www.transunion.com, www.equifax.com or www.experian.com.

I like TransUnion’s credit report format. It uses fewer pages and is easy to read. Get the three-bureau credit report and free credit score, and don’t buy other services unless you really want them.

Getting security deposit refunds. When moving out of a rental property, hire a professional cleaning service and get a receipt. Use a video camera to tape every square foot of the property. Start at the front of the building, walk inside — taking a shot of the unit number — and then walk through the unit. Describe everything as you see it through the camera lens. Show every surface close enough to prove it’s been cleaned.

The cleaning-service receipt and video should help if you have to fight to recover any part of your security deposit being unfairly withheld.

Pricey security deposits. If you can’t swing the up-front payment, you might be able to negotiate for a lower deposit. Ask whether you can pay your deposit through increased monthly rent payments. Or you can ask that part of your security deposit be refunded after an inspection at the six-month mark. Remember to get everything in writing.

Roommates. If you’re planning to have roommates, don’t be the only one to sign the lease or the rental agreement. The same is true for telephone, electricity, cable and other utility services. If you deploy, your credit can suffer if the rent or utilities don’t get paid by the roommates you leave behind.

The right way to pay rent. This is particularly important if you want to buy a home, if you have poor credit or if you want a lower security deposit.

I make my living mainly as a mortgage lender. In this business, we know that people who have paid their rent on time in the past year are likely to make their mortgage loan payments on time. You can use this to your advantage.

If you have a history of paying on time, you can negotiate for lower security deposits, talk a landlord into trusting you even if your credit is awful and prepare for home ownership.

Prove 12 or more months of on-time rental payments, and landlords and mortgage lenders will want to deal with you. Here are four tips to pay rent the right way:

• Try to avoid paying with cash. Receipts can be faked.

• If you pay by money order, make the order payable to the landlord or property management company. Photocopy it before you pay.

• The best way to pay is with personal checks. They offer absolute proof that you have paid, especially if you’re paying rent to a private landlord instead of a property management company.

• When paying a management company, it’s OK to pay with cash or money order (don’t forget to get receipts). If you want to buy a home, a letter from a property management company can serve as proof of your history of on-time rental payment.

Dave Peters is a semiretired loan officer and credit repair specialist. E-mail him at creditmatters@atpco.com.