How To Pass a Rental Credit Check With Confidence

Heading into the rental market, you may face stiff competition. One way to give yourself a leg up is to make sure you can pass a rental credit check without any issues. 

Landlords often run background and criminal checks as well, but a credit check will provide landlords with the answer to what a successful rental business needs to know: can you pay the rent?

If you are feeling unsure about successfully passing the rental credit check, let's dive into the type of information landlords will focus on and what steps you can take to put your best foot forward and get an apartment rented in no time. 

What Information Do Landlords Ask For?

The most critical step in the screening process for many landlords is to look at an applicant's credit history to make sure there isn't a financial risk to renting to them. Landlords can ask applicants to provide Social Security Numbers or Individual Taxpayer Identification Numbers so that they can complete credit and background checks. Before running these background checks, landlords do have to get an applicant's written permission. 

A credit report will provide a landlord with an overall picture of a potential renter's financial history. A good credit report reassures landlords that the applicant can pay their rent on time. 

Although landlords don't require permission to view your public profiles online, always be mindful that just like prospective employers, landlords, too, will go online and look at your social media profiles. Along with your credit and background check, your social media is fair game, so be careful about what you post.

Who Pays for the Rental Credit Check?

Applicants for rental properties will pay for credit checks. The fees are typically part of the application fee. You can also ask to provide a copy of your credit report since you can access it for free annually from each of the three credit bureaus. If landlords accept your free copy, this can help you avoid the additional fees.

What Are Landlords Looking For on the Credit Report?

Here are some key things that landlords will look for when evaluating a credit report:

1. Credit Score

Credit scores typically range from 300 to 850. Each landlord is different, but a score of at least 600 typically places applicants in the range that would be the minimum requirement for landlords and property managers.

2. Payment Habits

Consistently making payments on time with several accounts over several years indicates stability and, of course, the ability to keep up with regular rent payments.

3. Rental History

Any landlord can report a tenant's rental payment history to a credit bureau. Any delinquent rental payments and evictions will be on this credit report, which will tell a landlord to pass on this tenant. 

4. Debt Load 

A tenant burdened with large debts may be unable to keep up with rental payments. Landlords would typically like to see no more than 50 percent of gross income spent on rent and bills.

5. Late Payments

If an applicant hasn't made credit card payments or paid other bills on time, this may indicate that they won't be paying the rent on time either.

6. Negative Information

Some red flags that an applicant has financial problems are bankruptcies, liens, garnishments, car repossessions, accounts in collection, and any other similar issues.

All of this information will give potential landlords a clear enough picture of an applicant's ability to pay the rent. 

Steps To Take To Pass the Rental Credit Check

1. Order Your Free Credit Report 

The best way to prepare yourself for landlord rental checks is to order your credit report. You must be aware of what your financial story is and whether potential landlords will view you as a viable candidate to rent or not. 

You are entitled to a free copy of your credit report from the three institutions once a year. There are three credit bureau agencies in the United States: Experian, Equifax, and TransUnion Credit. Each of these agencies compiles a credit report based on information received from lenders.

Other than understanding your financial history, there are two important reasons why you need to review your credit reports regularly:

Check for Errors

An experiment conducted by Consumer Reports asked almost 6,000 volunteers to access their credit reports and check for errors. Among the participants, 34 percent found at least one error on their credit reports.

The four most common errors found in this study included: 

  • unrecognized accounts
  • unrecognized debt reported to collections
  • payment incorrectly reported as late
  • payment incorrectly reported as entirely missed

Any of these types of errors can be detrimental to your credit score and cause landlords to question your ability to pay rent. If you find an error, go through the proper dispute resolution channels with the credit bureau and get the error fixed as soon as you can. 

Check for Fraud

The presence of any accounts that you didn't personally open could be a sign of fraudulent activity. If a criminal has somehow obtained your personal information, such as your social security number, they can open financial accounts under your name. 

If you find this kind of unusual activity, notify the credit unions as soon as possible so that you don't damage your credit. Provide as much proof as possible to clear your record of any fraudulent activity. 

2. Show More Proof of Good Payment History

Do you have some late or delinquent payments in your past that you worry could be a deal-breaker with landlords? Show them other bills that you have been able to pay regularly, such as your utility bills. Rental receipts that indicate you are paying your rent monthly are also an excellent way to prove responsibility. 

3. Offer Explanations and Show Progress 

Did you have a failed business venture? Did you go through a divorce? Were you unemployed for some time? Offer whatever explanations you can for any negative information on your credit report. Then show landlords how you were able to recover financially any way you can. 

4. Show Them the Money 

If there is concerning information on your credit report, there are some ways you can convince a landlord that you are still a good candidate. Show them you can pay rent by:

  • Demonstrate provable income to landlords with bank statements and pay stubs going back several months
  • Offer to pay landlords a few months of rent in advance
  • Offer to pay landlords a larger deposit

5. Provide Landlords with References 

If you can get references from credible sources to show landlords, the letters can help sway them to rent to you if you have the right people vouching for you. 

For example, letters from previous landlords indicating that you were a good tenant and paid your rent on time would be a great reference. 

Other appropriate reference letters would be from property management companies, employers, roommates, and business associates. Any references from friends and relatives would be pointless unless you prove that you were paying them rent. 

6. Get a Guarantor to Sign the Lease

A guarantor or cosigner would be someone willing to sign a lease and make the rental payments if you are unable to. Having a cosigner should offer added security to the landlord that they will always receive the rent.

If a landlord allows you to have a roommate, then finding someone with good credit to live with is another good option.

How to Improve Your Credit 

Credit scores can change over time. If you know you will be going out into the rental market soon, here are some ways you can be proactive:

1. Pay Bills on Time

Consider setting up automatic payments or reminders on your phone or emails to help you remember to make those payments on time.

2. Pay as Much as You Can

If you stick to just paying the minimum amount required, you are letting interest charges add up, which will cost you more in the long run. Showing that you can pay off your debt each month will positively impact your credit score and report.

3. Keep Low Credit Balances

Keeping your balances low shows that you are using your credit responsibly and not overspending. One way to track this is to calculate the credit utilization ratio, which is a percentage of what you spend divided by the amount of credit you have available. Keeping your spending to no higher than 30 percent of the credit you have available can help improve credit scores. 

If you are heading out to the rental market soon, order your free credit reports and ensure accuracy. Pay down your debts and get a guarantor or roommate to sign the lease. Finally, provide excellent rental and employment references and prove steady income and good payment history to help you move into your new home fast. 

Nadia is an M.B.A. graduate and freelance writer. She also likes to write about all aspects of mom life, co-authors the blog This Mom Is On Fire, and advocates for better dementia healthcare for seniors.