Does Low Income Housing Require A Credit Check?
Credit is part of adulthood. Whether you need to buy a new stove on credit or qualify for an auto loan, your credit score impacts your life in countless ways. Even people looking for new jobs often have their credit score scrutinized before being hired. But if you are a low-income individual, what impact does your credit score play on finding housing?
The truth is that your credit can impact your ability to find housing even if you are designated as a low-income individual, so it’s important to do your best to understand and maintain your credit score. The answer to this question often lies in where you are seeking housing and who is giving you a lease.
While technically government subsidies don’t look at your credit, often the vouchers they provide mean you have to go to a landlord who will look at your credit.
Further, as a low-income person, you probably already know how hard it can be to build a good credit score when money is so tight. Do you know your credit score and what impacts it? Do you know where to look for low-income housing and how your credit might impact securing that housing for you and your family? Why do so many people and housing agents place such significance on your credit score?
The first step to building a good score is understanding how it works. Read on to learn more about credit scores and how they will impact you as a low-income individual while seeking housing options.
Credit Scores and Government Subsidies
Let’s start with some good news on the topic of credit scores and low-income housing. The government offers a variety of programs for its citizens who might have unique needs. This might include programs for veterans and those who are disabled in addition to those who need low-income housing.
Government subsidies are available for those who need low-income housing. The government will consider two things typically when trying to decide if you qualify for these low-income subsidies.
First, they will consider your income. They will look at all income sources you might have, including things like your paycheck, child support, and even other government aid you might receive.
The government will also ask for information about your assets. Assets are anything you own outright, such as a vehicle.
Beyond income and assets, the government will not look at your credit score for government subsidies. The good news is that in some scenarios, that means you can get government housing without having a credit check.
Sometimes though, these subsidies come in the form of vouchers. Then the low-income individual needs to use these vouchers with public landlords to get housing. Often these landlords will do a credit check, even with the government subsidy.
Understanding a Credit Score
Understanding your credit score is an important first step in seeing why it matters in so many situations, like housing, buying a car, or landing a new job.
You can get a free credit report with information about your credit score.
Your personal credit score is a number that is constantly being calculated based on several factors connected to your finances. Your credit score is calculated based on five different weighted factors. These include:
- Payment history weighted at 35%
- Amounts owed weighted at 30%
- Length of credit history weighted at 15%
- New credit weighted at 10%
- Other credit factors weighted at 10%
When FICO or other credit bureaus create your score, they look at your credit report, gathering this information to calculate a credit score.
Credit scores can have a range and can regularly fluctuate based on your financial actions. Credit scores range from 300 to 850. The higher your score, the better. The lower your number means you have worse credit.
Generally, credit scores are evaluated this way:
- Above 750: excellent credit
- 700–750: good credit
- 650–700: fair credit
- 600–650: bad credit
- Below 600: very bad credit
Someone can regularly use credit and still have a high score. Sometimes someone who doesn’t have much financial history will have a lower score simply because they have not used much credit to create a score.
Why Does Your Credit Score Matter?
Your credit score is a representation of you and your finances. It tells how you use or misuse money. Your personal credit score tells about how much money you owe to other people. It tells if you are using all of your available credit, which would mean your money is probably tighter because of the necessary payments.
One crucial thing it tells potential landlords is how well you pay your bills. Do you pay your bills regularly and on time? This is important to a landlord as they want to know you can pay your rent on time. A lower credit score might indicate to a landlord that you might have trouble paying rent or even not be responsible for paying it on time.
Potential employers often use credit scores as an indication of how responsible you will be as an employee. To them, if you pay your bills on time and keep a higher score, it indicates a certain level of responsibility that shows you might also be a quality employee.
How Does Being Low Income Impact Your Credit Score?
There are several ways being a low-income individual can impact your credit score.
Anyone who has ever struggled to pay their bills, buy groceries, and keep a roof over their head knows the juggling act it can take to cover it all.
People who are low-income often work in jobs that are not salaried. Hours are varied and can get change from week to week, causing varied income to come in. Without consistent income, it can be challenging to pay bills in a timely way and maintain a good credit score.
Even if a low-income household can pay all the bills by the end of the month, they can’t always do it on time. In some cases, it’s necessary to rely on credit when you can’t pay all the bills.
Another impact of being low income is the inability to obtain credit. The low income is prohibitive in gaining credit. Now, some might suggest not having credit cards that have big balances is a good thing.
But having no credit at all also negatively impacts a person. They can’t show their ability to be responsible with money because they don’t have a credit history.
How Can You Qualify for a Low Income Tax Credit?
If you are a low-income household, you can apply for a low-income housing tax credit. This low-income housing program qualifies you for housing that is government-sponsored at a reduced rate.
There are a few basic requirements. You can apply as either a single person or a household. The term household means more than one person living in your home. There are no citizenship requirements, and eligibility is available all through the country.
To qualify for a housing community that accepts the low-income tax credit, they will look at your income. Income requirements vary depending on the location and get calculated by looking at the area’s median income.
Many communities that offer low-income tax credit housing also have restrictions on the community. For example, sometimes the community is limited to only senior citizens or people with a disability. Because this housing is so often in demand, no matter where in the country you live, you should be prepared that you might have to go on a waiting list.
There are few things that might disqualify you for a low-income housing tax credit. They may check your credit score. Often it’s not necessary to have perfect or even good credit. They just will not rent to someone with poor credit.
Often, landlords will also check your rental history and want to speak to a previous landlord for a reference. If you have not been a good tenant in another location, this may hurt as you apply for the low-income tax credit housing.
Impact of Credit Scores When Finding Low Income Housing
Finding quality low-income housing can be a real challenge. Adding to that challenge can be a below-average credit score. Government subsidies are available without the hassle of a credit check. Many landlords who accept those subsidies will do a credit check, though.
If you need help getting free or affordable phone service, we can help. Click here to apply for free wireless service through the federal Lifeline program.