Understanding Landlord Credit Checks: A Comprehensive Guide

Owning and managing property is a significant investment, and landlords need assurance that tenants will pay their rent on time. When you apply for a rental property, your potential landlord often runs a credit check as part of the screening process. This helps them gauge your financial responsibility and ability to pay rent. Here’s a detailed look at what landlords seek in a credit check and how you can prepare your credit to rent an apartment or house.

Why Do Landlords Require a Credit Check?

Landlords prioritize finding tenants who will consistently pay rent on time. They might rely on that rent check to cover their mortgage, property taxes, and other bills. Screening applicants usually involves running a credit check because your credit report reveals your history of paying debts and how much debt you carry. While it may not directly show past rent payments, this information helps landlords assess your ability to afford rent and make timely payments.

Your credit report is just one tool landlords use when screening tenants. They may overlook credit concerns if you have solid explanations, like recovering from a past job loss, or other ways of proving financial responsibility.

What Can Landlords See on Your Credit Report?

When landlords pull your credit report, they can see:

• Your debt accounts (credit cards and loans), with their balances and minimum monthly payments
• Your credit card utilization (balances relative to credit limits)
• Payment history, including late and past-due payments
• Negative information such as loan defaults and accounts in collection
• Bankruptcy
• Foreclosures and repossessions

How to Pass a Landlord Credit Check

If you plan to apply for a rental soon, here are some ways to prepare your credit and increase your chances of approval:

• Check your credit report to see your current credit score and what information a prospective landlord would see.
• Dispute any inaccuracies that could be dragging down your score. You have the right to dispute your credit reports with all three credit bureaus (Experian, TransUnion, and Equifax) for free.
• Make on-time payments on all of your debts and bills since payment history is the most significant factor in calculating credit scores. If you’re past due on any accounts, make payments to bring them current.
• Reduce unnecessary spending and make progress on paying down debts to keep your credit utilization low.
• Don’t apply for new credit accounts unless absolutely necessary. Credit applications add a hard inquiry to your credit report, which can create a small but negative impact.

What Is the Minimum Credit Score to Rent an Apartment?

There isn’t a standard or legal minimum credit score required to get approved for a lease. Individual landlords and property management companies set their own minimum or range they’re willing to accept.

If your FICO® Score is 670 or above, it shows a landlord you likely have good creditworthiness and probably won’t be at risk of failing to pay rent. However, the minimum score required by a landlord might vary depending on the region, the property, the rent amount, and your income. In very competitive rental markets, you might need a higher credit score to land a lease.

Credit scores below 670 won’t automatically disqualify you; it just might cause a landlord to scrutinize other aspects of your credit report or finances more heavily to determine if renting to you feels safe or too risky.

What Else Do Landlords Look For?

When screening tenants, landlords and property managers typically consider additional information beyond credit. Some landlords use tenant screening services that can generate details not found on credit reports, such as employment verification and rental history.

While policies vary by landlord and property management company, the following factors are often part of the screening process:

Employment and Income

Landlords may request your employment and income verification to assess if you can afford rent. They’ll want to confirm that your monthly income is reliable and sufficient to cover rent payments, along with your other regular expenses. You may need to provide recent pay stubs, W-2 forms, and bank statements as verification.

Eviction History

Evictions are major red flags to landlords, though they don’t actually appear on your credit report. However, if you still owed rent or fees after an eviction and never paid, it’s possible the landlord or property management company sent those debts to collections. This would then show up as a collection account on your credit report, revealing the eviction in a roundabout way.

If the landlord uses a tenant screening company to obtain a rental history report, they can see evictions listed there. Evictions can stay on these reports for up to seven years.

Criminal Background

It’s also common for landlords to run criminal background checks when screening tenants, which could reveal items such as sex offender registry listings, active warrants, pending criminal cases, and past felony or misdemeanor convictions.

Having a record isn’t necessarily a deal-breaker, but the landlord can use this information to determine if a tenant would be too risky for the property or safety of other tenants.

How to Rent if You Have Low Credit

Having a less-than-desirable credit score often makes it harder to secure a lease for a rental property—but not impossible. There are government programs available, such as the Housing Choice Voucher program, or you can try these strategies to improve your chances:

• Find an individual landlord: Rather than applying for a large apartment complex, look for a very small apartment complex or individual condo, duplex, or rental home owned by one person. These individual landlords can be more flexible than property management companies at larger apartment complexes, which often have rigid policies.
• Offer more money upfront: If you can afford to, offer to pay a higher security deposit or more than the first month’s rent upfront. This is a sign of good faith that could also reduce potential financial risks for the landlord.
• Nab a cosigner: If you have a trusted family member or close friend with much better credit than you have, consider asking them to be a cosigner or guarantor. They won’t live with you, but you’ll share financial responsibility for the lease. (A cosigner is responsible for any missed payments, while a guarantor usually only steps in if you break your lease early or default on it.) Only use this option if you’re certain you can pay rent on time; otherwise, you’ll both be penalized.
• Provide references: When your credit isn’t in ideal shape, landlords might be open to other proof of your reliability, such as references from past landlords. You might also provide reference or contact information from your employer or former colleagues who can speak to your character and ability to be a good tenant.
• Find a roommate or shared housing: Applying for a lease with a roommate, particularly one with better credit, might sway a landlord. Additionally, you might find luck by renting out a room in a home that the owner lives in, as their criteria might not be as strict as traditional landlords.

The Bottom Line

Checking your credit report is often a routine step landlords take when screening rental applications, and depending on their policies and preferences, it can make quite a difference in their decision.

Some landlords are willing to make exceptions or be more flexible, especially if you can show your reliability and financial responsibility in other ways. But if you plan to apply for an apartment or rental home in the near future, it’s wise to focus on improving your credit now so you have greater chances of landing that lease. You can monitor your credit for free with Experian to help track your progress as you work to improve your credit.

For any mortgage service needs, O1ne Mortgage is here to help. Call us at 213-732-3074, and let us assist you in finding the best mortgage solutions tailored to your needs.