One of the most crucial stages in your application to rent a house or apartment is the credit check. However, you might wonder, what do landlords look for in a credit check? Credit checks let landlords find out if you are likely to pay rent on time and be financially responsible. Knowing this will help you polish your application and raise your chances of acceptance.
As more people are renting, landlords mostly depend on credit checks to lower their risk. This article defines a rental credit check, why landlords do it, what they search for in your credit report, and how you could pass one.
We also discuss the differences between soft and hard credit checks and how LeaseRunner's systems enable landlords to fairly and rapidly perform tenant screening.
Quick Facts About Things Landlords Look For In a Credit Check
What Is a Rental Credit Check?
Reports that landlords use to learn about your financial management are rental credit checks. It displays your credit score, payment record, debt, and any public records (including bankruptcies or evictions. Landlords use this information to determine if you can be a conscientious renter and pay your rent on time.
One or more of the three main credit bureaus, Experian, Equifax, and TransUnion, produce the credit report. Every bureau may have somewhat different data, hence landlords occasionally review more than one report. LeaseRunner utilizes Experian for credit checks in the tenant screening process, offering comprehensive credit reports that feature the VantageScore 3.0, along with details on addresses, employment (if available), and any liens, bankruptcies, or judgments..
Why Do Landlords Use Credit Checks?
Rental credit checks or credit checks before lease help landlords lower their chances of neglected property damage or delayed rent payments. Usually speaking, a high credit score indicates that you handle your money wisely and pay your bills on time. A low credit score might point to missing payments, heavy debt, or other financial difficulties.
This makes landlords concerned about your possible irregular payment of rent. Therefore, knowing what landlords look for in a credit check clarifies how they see your application. It also tells you how you may raise your odds.
What Is A Rental Score?
Certain landlords rely on a rental score, a figure derived from your credit record and rental history. It enables landlords to rapidly evaluate their tenant risk. Rental scores weigh your payment history, evictions, and sometimes your income. Although they are not used by all landlords, rental scores are becoming more frequent in tenant screening.
The Impact of Credit Scores on Your Rental Application
Your creditworthiness is summed up in a three-digit figure called your credit score. The credit score ranges vary and normally run between 300 and 850. As for VantageScore® 3.0, the types or ranges have meaning like this:
- Superprime: 781–850
- Prime: 661–780
- Near Prime: 601–660
- Subprime: 300–600
While some homes call for credit score ranges of 700 or greater, most landlords desire one over 600. Strict credit criteria abound in luxury residences.
The Differences Between Credit Score Ranges and Types
When it comes to credit scores, FICO® and VantageScore® are two of the most common types.
- FICO®: Requires at least six months of credit history and recent activity to generate a score. This means individuals with limited or inactive credit histories may not have a FICO® score.
- VantageScore®: Can generate a score with just one month of credit history and a single account reported within the past 24 months. This inclusivity allows individuals with sparse or recent credit activity to be scored.
At LeaseRunner, we choose VantageScore® 3.0 as a reliable tool for assessing tenants’ financial health. As a landlord, you need an accurate and up-to-date understanding of a potential tenant’s creditworthiness, and VantageScore® 3.0 provides just that.
By using VantageScore®, you gain a clearer, more precise picture of a tenant’s financial reliability, helping you make informed decisions with confidence. With its ability to reflect recent credit activity and behavior, VantageScore® ensures you’re always up-to-date on a tenant's financial profile.
What Do Landlords Look for in a Credit Check?
When doing credit checks for renting, landlords looking at your credit record focus on numerous important areas:
Credit Score
The first things landlords look at are the credit score. It turns your financial past into one number. Many landlords establish a minimum credit score, often around 600. Your chances improve with the increasing score.
Payment History
Landlords often see if you paid your rent or other payments on schedule. Red flags are late payments, defaults, or accounts turned over to collectors. Your application may suffer from one or two late payments, but many late payments are more concerning.
Debt-to-Income Ratio
Debt-to-income or DTI runs your income against your monthly debt load. Landlords want to know that your income will be sufficient to pay your bills and your rent. A DTI higher than 40% might indicate financial strain and cause rejection. For instance, your DTI is 50%, which is high, if you make $3,000 a month and pay $1,500 monthly on debt.
Public Records (Bankruptcies and Judgments)
Public records on your credit report may include court rulings, bankruptcies, and judgments. These are rather serious red flags. Usually leading to rejection, a bankruptcy or judgment may drastically impair your rental credit.
Soft vs. Hard Credit Checks: What’s the Difference?
Soft Credit Checks
Your credit score is not changed by soft credit checks. Landlords may check identities or pre-screen candidates using them. These inspections are less thorough and are employed early in the process.
Hard Credit Checks
Applying officially for a rental often results in hard credit checks. They show up on your credit report and, for a few points, might momentarily reduce your score. Short time, many hard pulls might have a more detrimental effect.
Why Do Credit Scores Differ?
Credit scores can differ based on permissible purpose because credit bureaus generate different versions of your credit score depending on why someone is checking it. This is both legal and intentional under the Fair Credit Reporting Act (FCRA). Here's why and how it happens:
What Is a “Permissible Purpose”?
Under the FCRA, entities can only access your credit report for approved ("permissible") reasons, such as:
- Applying for a loan or credit card
- Tenant screening by a landlord
- Employment background checks
- Insurance underwriting
- Account review by an existing creditor
How Does LeaseRunner Handle Credit Checks?
LeaseRunner is a tenant screening services provider, designed to let landlords legally and conveniently do credit checks. Through our partnership with Experian, we provide detailed credit reports that include the VantageScore 3.0 credit score, payment history, and any public records such as bankruptcies or judgments.
Our platform utilizes a "soft inquiry" when accessing credit reports, ensuring that the tenant's credit score remains unaffected. This approach allows landlords to make informed decisions without impacting the tenant's credit standing.
Interested in screening tenants’ credit scores and more with LeaseRunner? Sign up and choose your preferred tools!
6 Tips on How to Pass a Credit Check for Renting
If you're prepared, you can easily pass a rental credit check. The six suggestions below will help you raise your chances:
- Review your credit report early: Quickly use Experian, Equifax, and TransUnion to self-check your credit reports. Look for mistakes, such as incorrect addresses or accounts not your own. Correct any errors to raise your result.
Usually, credit checks process instantaneously.. While some landlords wait for complete paperwork, others get fast reports. You should start early, preparing your credit records.
- Describe negative entities: If you have bankruptcies or late payments, send a brief note to landlords. For missing payments, for instance, job loss or medical costs, help to explain.
- Reduce your debt: Pay off loans and credit card debt to lower your debt-to-income ratio. This indicates to landlords your financial stability.
- Show steady income: Send current pay stubs, bank records, or job letters. Stable income tells landlords you can pay rent.
- Share a bigger deposit: Offering a larger security deposit can assist landlords in feeling more comfortable if your credit score is poor.
- Think of a co-signer: Good credit will allow a co-signer to guarantee your lease. This lowers landlord risk and raises your prospects.
Wrap Up
So, what do landlords look for in a credit check? They want to see a good credit score, a clean payment history, a reasonable debt-to-income ratio, and no serious public records like evictions or bankruptcies. Knowing this can help you pass a rental credit check more likely and help you prepare better.
To streamline the process, use LeaseRunner’s full suite of tenant screening reports. Early on, check your credit; correct mistakes, lower debt, and provide income verification. These actions will allow you to find your future house with ease.
FAQs
Q1. Do private landlords do credit checks?
Indeed, although not always, many private landlords do credit checks. Others depend on referrals or firsthand interviews. To lower risk, nevertheless, credit checks are becoming increasingly routine among private landlords.
Q2. What is the relation between credit score and apartment renting?
When renting an apartment, your credit score plays a big role. Apartments often have minimum credit score requirements. If your score is low, you may need to provide extra documentation or a co-signer.
Q3. How to improve your credit score before renting?
Raising your credit score before you apply can boost your chances. Keep old accounts open, pay payments on time, cut debt, and steer clear of new credit searches.
Q4. What happens if you fail a rental credit check?
If you fail, landlords might turn down your application. You may attempt to correct problems and get comments. Sometimes, giving a bigger co-signer or deposit helps.
Q5. What credit score ranges do landlords prefer?
Most landlords desire renters with credit scores higher than 600. Good and often approved scores are between 670 and 739. Very excellent scores above 740 help to simplify the approval process. If your score is poor, landlords might demand a co-signer or a larger deposit.
