What Landlords Really Look for When Reviewing Your Credit
No matter the status of your finances, the phrase “credit check” can cause anxiety when it comes to applying for an apartment. That’s because even if you can afford the rent, your credit can make or break your chances of securing a lease for that dream apartment you’ve just found. Landlords use your past financial records to predict your future behavior — knowing what they find most important can help you to land that spacious one-bedroom with a stunning park view.
Credit Score and History
Landlords want to know that the rent will be paid every month on time. One of the ways to help determine this is by looking at your credit report2 and evaluating aspects such as your debt-to-income ratio, payment history, the percentage of credit limit used and the length of your credit history.3 A six-figure salary may not be impressive if your debt is also six-figures long, for example. Your overall credit score is also important — the higher it is, the better proof the landlord has that there won’t be any late payment excuses.1
Credit reports that show delinquency could be a cause of concern to a landlord. For example, a defaulted personal loan or unpaid credit card bill may indicate that you tend to live above your means. One late payment on an account that is currently up-to-date will likely not cause much of a problem, but a pattern of late or missed payments may cause the landlord to deny your application.1
Rental properties may likely be the property owner’s livelihood, which means that nonpayment of rent will directly affect her income. Evictions can become messy and expensive, so credit reports help the landlord determine if you will be a model tenant or one that causes her constant problems. Therefore any negative instances, such as evictions, defaulting on a car loan, having owned a house that was foreclosed on or even credit cards being charged off are considered red flags.1 On the other hand, if your credit history is clean and portrays financial responsibility, there is a greater chance that available home will be yours.
Tenant Screening Report
You know there’s more to you than just your credit report, and landlords agree, which is why many use a full tenant screening report to get a more comprehensive picture of who you actually are.4 Numerous property management and credit companies provide this service for landlords. Included in the tenant screening report may be a criminal background check, sex offender background check, unlawful detainer or eviction history, employment verification and possibly even a Homeland Security terrorist check.4 Landlords do not want any surprises about the people living on their property.
Mismanaged funds or past financial hardship may make it tougher to rent, but bad credit doesn’t mean all hope is lost. Having imperfect credit doesn’t necessarily mean you won’t pay your rent on time. Show the landlord good faith by having a parent, relative or friend with good credit co-sign your lease. The co-signer agrees to pay your rent in the event that you can’t — a guarantee to the landlord that there won’t be any missed payments.6 You may also want to offer a higher than usual security deposit or pay three to six months of rent in advance.
If your credit score slipped due to a medical problem, job loss or other temporary problem, explain the circumstances to the landlord so they understand the situation. Provide proof of income with either paycheck stubs or a letter from your boss. Letters of recommendation from a past landlord or a supervisor at work may also help to prove your credibility.
At TransUnion, we believe in Information for Good. Whether it’s creating web-based financial products or sharing expert tips, insights and news on our blog, our mission remains the same: putting powerful tools and resources in your hands to help you know your credit, protect your identity and more effectively manage your financial picture.
- What Landlords Really Look For in a Credit Check https://www.nerdwallet.com/blog/finance/landlords-credit-check/
- TransUnion Reveals Almost Half of Landlords Consider Renters’ Credit Health as a Key Factor in Leasing Decision http://newsroom.transunion.com/transunion-reveals-almost-half-of-landlords-consider-renters-credit-health-as-a-key-factor-in-leasing-decision
- What Influences Your Score http://your.vantagescore.com/score-influences
- What Happens When a Landlord Checks Your Credit http://blog.credit.com/2014/08/what-happens-when-a-landlord-checks-your-credit-93811/
- TransUnion SmartMove https://www.mysmartmove.com/
- Using a Cosigner: What You Need to Know https://www.credit.com/loans/loan-articles/cosigner-what-you-need-to-know/