Renting an apartment can be an exciting step, but not everyone has the ideal financial history that landlords and property managers are looking for.
If you are a new renter who has little financial and work history, or if you are simply looking for a place to live after a unique situation, you may find your rental search more difficult than most; especially if you are looking in a hot rental market. In these instances, you may benefit from getting a cosigner or a guarantor to help you get the apartment of your dreams.
When Would a Renter Need a Cosigner or Guarantor?
While not every rental will require that you have a cosigner or guarantor, but if you do not meet certain criteria, your application may not be accepted without one. Here are some of the reasons you may need a cosigner or guarantor to qualify for the rental you want:
- Little or No Rental History: Landlords often want to see that you have demonstrated responsible behavior in past rentals. One way to do this is to check with previous landlords to verify that you have a history of on-time rental payments, did not cause property damage, and that you did not violate any lease terms. If you are a first time renter, you do not have this history to help you stand out from other applicants.
- Bad Credit or No Credit: Landlords use credit reports to gain insight into how well potential tenants meet their financial obligations and pay bills. If your score is low due to extenuating circumstances (an uninsured hospital visit, for example) or if an adverse credit event happened in the past but your financial circumstances have become more stable, a landlord may be willing to accept your application with the backing of a cosigner or guarantor.
Learn more: 3 Ways to Grow Your Credit Score While Renting
- Unmet Income Requirements: To ensure that you have room in your budget for other expenses, experts say that rent should cost no more than 1/3rd of your monthly income. For this reason, landlords will often require that accepted applicants have verifiable income that is at least 3X monthly rent. If you are renting as a college student, this can be an exception. Parents or guardians may be willing to pay for a student’s housing, and the landlord could require that the parent co-sign the lease agreement.
What is the Difference Between a Cosigner and a Guarantor?
The terms cosigner and guarantors may often be used interchangeably, but there can be some differences when it comes to renting. Understanding the key differences can help you and your new landlord determine which will be right for your circumstances.
What Does it Mean to Be a Cosigner for a Rental?
A cosigner is a responsible third party who has a solid credit history and financial standing. This person is often a family member or friend, and they can be held responsible for unpaid rent or fees, or fines for damages if required by the landlord. While cosigners typically do not live in the rental property with the tenant, depending on the lease terms, a co-signer on a lease has more rights to the rental and might theoretically have the right to live in the apartment as a tenant.
When cosigning, both parties are immediately responsible for rent and any incurred fees. While a cosigner could be a parent or family member, it could also simply be a roommate with whom you are splitting the rent. In this instance, both tenants are legally responsible for the full rental fee, regardless of the other tenants’ ability to pay.
What Does it Mean to Be a Guarantor for a Rental?
Guarantors act in a similar manner as a cosigner. As the name suggests, they guarantee that they will assist and cover any fees should the renter be unable or unwilling to pay. Guarantors are legally responsible for rental payments, fines, and fees for damage, but they are not given any rights to occupy the rental property. Most landlords and property managers have strict guidelines for guarantors to ensure that they are financially able to assume the responsibility of rent in addition to their current expenses. Guarantors must have a stellar credit report and income history.
Guarantors and Cosigners Alike Must Undergo Tenant Screening
Landlords and property managers assume a certain amount of risk when allowing an applicant who does not meet their tenant screening standards to rent the property. Guarantors and cosigners can serve to mitigate this risk. For this reason, a cosigner or guarantor would not be useful if the applicant and their respective responsible party cannot prove that the property would be covered if the applicant failed to pay rent. This means that both need to undergo background checks, credit checks, and will likely need to provide information on their work history (including relevant pay stubs).
Cosigning or acting as a guarantor for another person is a legal agreement; before you ask someone to do this for you, be sure that they understand exactly what they are committing to.
New renters may be inexperienced, but having a lack of credit history or rental history does not mean that someone is automatically a bad renter. Landlords know this, and while landlords need to protect their investment, requiring a guarantor can be an avenue to ensure that new renters can get a rental while renters are still establishing themselves.
Brentnie, you’ve written an interesting post! When your credit score is low, having a cosigner or guarantor on your lease is a sure way to get your preferred apartment. However, in my opinion, one should seek help from well-wishers for a limited time while working to improve one’s credit score on their own.
Great thoughts, George! Yes, there are quite a few ways renters can improve their credit score to ensure that their next application is accepted without the need for a guarantor. In a tight rental market, renters who require a guarantor may find their application is less enticing to landlords. Credit score improvement (particularly when combined with reports of good lease adherence at their current rental) can be a big step to ensure that their application won’t be overlooked for their ideal rental the next time they apply. We outline some helpful tips in this post: 3 Ways to Grow Your Credit Score While Renting