Rental Credit Check: What to Expect
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Your credit history could make a big difference in your next apartment search. Landlords and property managers typically run a rental credit check on potential applicants to minimize their risk and avoid leasing to someone who might struggle to pay.
For would-be renters, the credit-check process may seem mysterious. Some credit checks include your actual score while others look at your credit history on your credit reports, which doesn't include your score. Here's what landlords are looking for when they check your credit.
How to pass a rental credit check
There are two things you can do to set yourself up for success before applying for an apartment — and they’re both free.
Know your credit
If you're worried about what a potential landlord or property manager might find on your credit report, there's a simple fix: Look first. You're entitled to a free copy of your credit report from each of the three major credit bureaus. Those will include all the credit information the landlord will see, sometimes more.
You can't control how your credit report might be interpreted, but if you already know what's in it, you'll be more prepared to answer questions and provide context, if needed.
Dispute errors with the credit bureaus
Use this time to spot inaccurate information and dispute errors with the credit bureaus. Look for an account or name that isn’t yours, a payment marked as missed but that you actually made or inaccurate loan balances or credit limits. Getting these errors fixed before applying for an apartment can increase your chances of being approved.
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How landlords and property managers check credit
A credit check can mean a lot of different things, and credit score requirements can vary among apartments. It's sometimes possible to rent with no credit history at all.
Landlords might simply verify your identity and check your credit score. Others may opt to run background and credit checks, or look at social media, county records and bank statements. Depending on the service used, these screenings might result in a hard inquiry, which temporarily dings your credit score, or a soft inquiry, which doesn't. You might avoid a hard inquiry by asking your landlord upfront how they plan to screen you and offer to provide a credit report yourself.
Here are a few other ways landlords and property managers may check credit:
Landlord associations
Organizations such as the National Association of Independent Landlords offer tenant credit reports to landlords for a fee.
Tenant screening services
Some tenant screening services offer credit reports to landlords. On e-renter.com, for example, landlords request certain credit requirements, and the site tells them whether the tenant meets them. Reports may also include evictions, bankruptcies, collections and other background information.
Credit bureaus
Equifax, Experian and TransUnion offer several credit screening products for the rental market. These services may require an applicant to initiate the check, and generally count it as a soft inquiry.
Experian has partnered with real estate marketplace Zillow to help landlords and property managers find and screen potential tenants. Renters pay a $35 fee for the housing application and screening reports, but they can use them for multiple rental listings on Zillow.
Not all landlords and property managers do credit checks online. Some may request a copy of an applicant's credit report or ask about credit in person.
Credit-related deal breakers
Landlords or property managers generally aren't looking for immaculate credit, but certain negatives may make them more likely to reject an applicant. Examples would be credit card charge-offs or car repossessions.
On the other hand, good credit doesn't ensure approval. Factors such as income, evictions and criminal convictions can also play a big part. If possible, talk to the landlord to get a better idea of what they are looking for before applying.
If a landlord used your credit score to evaluate you and you were rejected because your score was deemed too low, they are required by the Fair Credit Reporting Act to send you an adverse action notice that tells you why. The written or electronic notice should include your credit score; the scoring model used and the score ranges for that model; the date the score was generated; and the factors that negatively impacted your score in order of importance.
How to rent an apartment if you have credit challenges
If you have struggled to build strong credit or are just starting out, it can be hard to qualify for an apartment. Here are some options that may increase your odds:
Find a trusted family member or friend with good credit who’s willing to co-sign a lease for you. By co-signing, they are promising to pay the rent if you don’t, which makes it a less risky deal for the property manager or landlord. After a certain number of on-time payments, your landlord or property manager may agree to take your co-signer off the lease.
Use savings to pay for several months of rent upfront. This might convince the landlord or property manager that you are serious about your commitment.
Provide a written explanation for any negative marks. A landlord may overlook isolated credit missteps that can be explained, such as those due to job loss.
Reassess your budget. Looking for an apartment in a lower price range or with fewer amenities might expand your housing options and increase your chances of passing a rental credit check. Finding ways to lower your bills could help you keep up with payments, which can help build your credit.
Once you find a place, start building credit by considering a secured credit card, credit-builder loan or getting your rent payments reported to the credit bureaus.
Problems with tenant background checks
In recent years, tenant background checks have been under scrutiny from the Consumer Financial Protection Bureau. The CFPB reports that errors and false information in tenant screenings have made it harder and more expensive for people to find secure housing. Compared with homeowners, renters are more likely to be people of color, lower income, and live in urban areas, according to the CFPB.
The costs can be steep for renters, who often pay for reports they don’t get a chance to see. They also struggle to get negative, incorrect or misleading information on the reports fixed, and this unresolved information follows them to future applications. When tenant screening services report negative information it can be costly because people have to move farther from their work or school to find housing they can qualify for or end up paying more in rent or fees.
The CFPB argues that tenant screenings are not necessarily a reliable way to assess risk, or a potential tenant’s ability to pay rent on time, because previous rental payment history isn’t included in these reports.
Tips to avoid rental credit check problems
Tenant screening services can — and do — make mistakes. While some mistakes are out of your control, there are steps you can take to try to get the best outcome:
Before you apply: In addition to checking your credit reports and fixing any errors, if you’ve been evicted then check housing court records to ensure that the outcome of the case is correct (if not, contact the court to get information corrected).
During the application process: The CFPB recommends you give your full first, middle and last name and date of birth to make sure the screening company gets information on the right person.
If you need to correct a mistake on a tenant screening report: You can submit a complaint to the CFPB, contact a local fair housing organization or contact a lawyer.
