Yes, you can enter a rent-to-own program with bad credit. However, each program has its own unique requirements and obligations. Rent-to-own programs tend to have more flexible requirements than mortgage lenders or regular landlords, as they are designed to encourage homeownership for those still working on their financial profile.
However, specific marks on your credit report may disqualify you from participating in a particular program, such as a delinquent payment within the last year, bankruptcy, foreclosure, or eviction. So, while bad credit isn't necessarily a deal breaker, you'll have to review the program terms before applying.
Most reputable rent-to-own programs will require a credit check, the same as any other rental. Although you'll find several reputable programs that work with low-credit applicants, most still have minimum credit scores and will want to see a positive payment history in the recent past. For instance, if you have any delinquent payments within the last three months, you may have to wait to apply for specific programs to prove that you have the income and financial responsibility to pay your bills on time.
- Divvy Homes
- Zero Down
- Dream America
1. Divvy Homes
Minimum credit score: 550
Divvy Homes is a fin-tech company that facilitates rent-to-own home purchases. Applicants can qualify with a FICO score of at least 550 and three months of verifiable household income of at least $2500 or more. They also require a soft credit pull and a background check. Divvy Homes operates in 19 metropolitan areas across the country in the following states: Arizona, Colorado, Florida, Georgia, Minnesota, Missouri, Ohio, Tennessee, and Texas.
2. Zero Down
Minimum credit score: 540
Zero Down is another reputable rent-to-own program that operates in over 100 cities in the United States. Applicants must have a FICO score of at least 540, stable employment for at least three months, and a minimum household income of at least $3,500. They also want to see at least one year of clean payment history, current financial accounts (no collections), and a debt-to-income ratio below 50%. Plus, applicants must have savings equal to at least 2% of the home's purchase price, and the more you have, the greater your purchasing power (for example, $5,000 in savings means you qualify for a $250,000 home).
3. Dream America
Minimum credit score: 500
Dream America is a great rent-to-own program for those with bad credit but decent incomes. They accept FICO scores as low as 500, however, you must have at least $4,000 in monthly household income and savings of $8,000 or more (which can include a 401K or gift). Applicants must also have a 12-month track record of paying rent on time and a debt-to-income ratio of below 50%. Dream America operates in several metropolitan areas, including Atlanta, Dallas, Tampa, Orlando, and San Antonio. Plus, they have great reviews on Google and other platforms and plenty of testimonials on their website from satisfied customers.
Rent-to-own programs typically don't help build your credit directly, but they do give you more time to work on your score. Rent payments aren't usually reported to credit bureaus unless you stop paying, although you can always ask the program if they are willing to report positive payments.
There are also ways you can also self-report payments using a third-party service or charge your rent to a credit card and pay it down every month (although be sure to avoid using cards with high interest or cash advance fees). However, rent-to-own programs provide you with a stable place to live while you build your credit, allowing you to focus on aspects of your score that need the most work.
Rent-to-own programs can be a great way to get into a home while you save and improve your financial profile. Many reputable programs don't require a high FICO score to qualify. However, you should do your own research and find a program that makes sense for your financial situation.