If you’re worried about what a potential landlord is going to see when they check your credit, you’ve come to the right place.
Here you’ll find a breakdown of how landlords (and property management companies) check your credit, what they see, and what they care about. We’ve also included a list of things you can do — like DIY credit repair — to positively impact what comes up in a landlord credit check.
How landlords check your credit
Though not all landlords will conduct formal tenant screenings, it is best to assume they will, especially, if the landlord is using a property management company. The contents and format of tenant screening reports vary depending on which company the landlord uses. Generally speaking, though, you should expect landlords to see the following:
- Credit report
- Credit score
- Criminal background
- Sex offender background
- Eviction history
- Employment verification
- OFAC terrorist search
There are numerous companies out there that provide tenant screening services, including the big three credit bureaus:
- Equifax Resident/Tenant Screening
- Experian Connect
- TransUnion SmartMove
The cost of these services is typically passed on to prospective tenants via the application fee.
What landlords are looking for in your credit history
Do you have a high debt-to-income (DTI) ratio?
Though your credit report will not include salary or wages, the landlord will ask for it in your rental application. They can then compare your income to the debt listed in your credit reports. This gives them some idea of how much money you have left over – after paying your debts every month – to pay them rent. It’s up to the landlord, of course, what an acceptable debt-to-income is, but as credit expert Jon Ulzheimer reports for The Simple Dollar, “If your DTI comes in at over 45% to 55% (depending on the landlord), you could potentially be turned down for a new rental even if the rest of your credit checks out.”
Do you have a history of making late payments?
If you don’t pay your bills on time, landlords will doubt the likelihood of you paying them on time. That’s why it can be so helpful to have your rent payments reported to the bureaus, giving you a way to prove that, though you have paid other bills late, you prioritize your rent and always pay it on time.
It’s also helpful to distance yourself from late payments; the longer it’s been since late payments showed up on your credit reports, the better, showing that you have since cleaned up your act.
Do you have accounts that have been charged off and sold to a debt collector?
It’s one thing to be late on an account and quite another to fall so behind that it has been charged off and sold to a debt collector. Obviously, landlords don’t like to see this sort of credit history, but, as with late payments, the older your charge-offs and collection accounts, the better.
Do you have a bankruptcy, foreclosure, wage garnishment, tax lien, or judgment against you?
As bad as charge-offs and collection accounts look on your credit reports, negative public records like these are worse. Bankruptcy, foreclosure, wage garnishment, tax liens, and judgments show a history of the most of serious financial problems, decreasing the chances that a landlord will want to take a chance on you. Again, though, the older these public records, the better.
Other types of information landlords are looking for
In addition to your credit history, landlords will use the other resources in a tenant screening report to look at whether you have had any eviction orders filed against you or criminal convictions. They can also use the screening process to verify your employment.
How you can improve the results of a landlord credit check
Start early. If you’re apartment hunting tomorrow, there’s nothing you can do to improve your credit today. But if you plan ahead – giving yourself a few months to prepare before you start looking around – there is plenty you can do to make a difference.
1) Check your credit reports
The more you know about what your landlord is going to see in your credit reports, the better prepared you can be to answer questions about negative listings. In fact, you may want to go ahead and mention to them the red flags you know they are going to find. This not only shows you to be an honest, upfront person, but also gives you a chance to explain your situation, which a credit report will not do (unless you have included a 100-word statement in your report
You can request free copies of your credit reports every 12 months through AnnualCreditReport.com. You can also monitor your credit reports all year long through free credit monitoring sites. There are a number of them to choose from, but we recommend Credit Karma (for your TransUnion and Equifax reports) and Credit.com (for Experian).
You can also see free credit reports under the following circumstances:
- A change is made to your credit report due to a credit dispute
- You have reason to believe the credit report is inaccurate due to fraud
- You are unemployed and looking for work
- You are receiving public welfare assistance
- Your state offers a free credit report
Whichever way choose you see your credit reports, make sure you look at all three, as you never know which bureau’s report a landlord is going to see. Granted, you can ask when you apply, but by then it’s too late to do anything about negative listings that you may find on the report. Review your reports from all three bureaus so you can cover all your bases.
2) Start repairing bad credit, need be
If you find negative listings on your credit reports, the next step is to try and do something about them. The more time you have before you plan to start looking around for a new place to rent, the more you can do to repair your credit in the meantime. There is never any guaranteed length of time it takes to repair bad credit, but you should be able to make some progress in as little as 6 months.
Granted, the credit repair process may feel intimidating, but our DIY credit repair guide will walk you through it every step of the way. We also have multiple, in-depth resources on a wide variety of credit repair topics, including:
- Debt validation for debt that has been turned over to a collection agency
- Statute of limitations on old debt that you may no longer be legally responsible for
- Credit disputes for errors on your reports that could be dragging down your credit score
- Credit repair letters you can tweak and send to credit bureaus, collectors, or original creditors
- Pros and cons of adding a 100-word personal statement to your credit reports
- Debt settlement for debt that cannot be resolved via dispute or debt validation
- Credit monitoring to track the progress of your credit repair efforts
And should you have questions specific to your unique credit situation, you can always ask in our free, friendly credit repair forum.
3) Build positive credit history
Sign up for a rent-reporting service.
If you pay your rent on time every month, you can (and should) get credit for it. That said, the only way for your rent payments to impact your credit is for you to sign up for a rent reporting service. While rent payments will only be included in some credit scores – FICO 9, FICO XD, and VantageScore – all three of the big credit bureaus will include rent payment information in your credit reports.
Once you sign up for it, the rent reporting company reports your payment history to the bureaus as a tradeline. The bureaus include this payment history in your credit reports, which potential landlords can see when you submit your rental applications.
As with tenant screening companies, there are numerous sources of rent reporting services. And as you will see, not all rent reporting services do everything the same.
Rent reporting services vary in:
- Landlord involvement. Some require it; others don’t.
- How you make your rent payments. Some have you pay on online through the rent reporting service. Others have you pay your landlord directly.
- Payment verification. Some verify automatically via your online payments. Others contact your landlord every month for verification.
- Previous payments. Some allow you to add your rent payment history for the past 24 months. Others only report the rent payments made since signing up for the rent reporting service.
- Fee structure. Some have fees paid by you. Others have fees paid by the landlord (or shared by the two of you).
- Bureau reporting. Some report to one credit bureau. Others report to all three.
Of all the rent reporting services, we recommend RentTrack and eRentPayment, as they report to all three credit bureaus. They also allow you to make your payments online, eliminating the need for them to contact your landlord every month for payment verification. Just keep in mind that, while RentTrack does not require that landlords sign up through the RentTrack system, your landlord must be registered with eRentPayment for you to use their service.
Honorable mentions are PayYourRent and PayLease, both of which report to Experian RentBureau and TransUnion. Other rent reporting services only report to one bureau: Cozy, ClearNow, and Rentler report to Experian RentBureau. RentReporters and Rental Kharma report to TransUnion.
Use good credit card practices.
Ideally, credit cards should only be used for two things – convenience and building good credit. Neither of those includes carrying a credit card balance. The goal? Use your credit cards every month, but only charge what you can afford to pay off by your next due date, returning your balance to zero every month. Credit card debt too high to pay off this month? Try the debt avalanche or snowball methods.
If you don’t have a credit card, apply for a secured card.
You don’t need good credit to qualify. And provided you apply for one whose issuer reports to all three credit bureaus (as you should), it will help build your credit score. Use it the same way you would a regular credit card. The only real difference is that you’ll have to put up a deposit to secure the card, which will be equal to your available credit line. Learn more about secured credit cards and shop around for the best deal.
Ask to be added as authorized user to someone else’s credit card.
If you’re not comfortable doing this, it’s perfectly understandable. But if you do have a family member or close friend who you can ask to add you to their credit card account, it’s a great way to build better credit. You don’t even have to use the card; your family member or friend’s (responsible) use of the card is all you need, as their payment history will be included on your reports.
Consider a credit builder loan.
Bad credit or not, you could qualify for a loan through a community bank or credit union. They’re called credit builder CPN loans and they could be just the thing you need to boost your score. Get the facts about how credit builder CPN loans work.
Pay your bills on time, every time.
Just one late payment on your credit report can drag down your score by as much as 100 points. Keep that in mind before resigning yourself to paying late on a credit card, auto loan, or any other type of revolving credit or installment loan.
If a landlord turns you down because of your credit, you do have options. Offer a bigger deposit — two or even three months’ rent if you can swing it. If that won’t work, try a different landlord. (Your best bet is one that doesn’t work with a property management company.) And if you are rejected because of your credit, be sure to request a free copy of the tenant screening report that was used to make the decision. Make note of the negative information in that report and do your best to improve what you can.