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What Landlords Look For in a Credit Report

Nearly one in two landlords said the results of a credit check were among the top three factors used when deciding whether to accept a tenant’s lease application, according to a TransUnion study. The rise in online credit checks and increased competition in the rental market, meanwhile, have combined to put more pressure on potential tenants to make their applications shine.

For would-be renters, the credit-check process may seem mysterious. If you’re wondering what landlords scrutinize when they check your credit, here’s an insider’s look, along with strategies for landing a place to live.

How landlords and property managers check credit

A credit check can mean a lot of different things. It ranges from finding out whether a tenant meets a certain standard to poring over pages of account histories.

Janet Akin, a property manager in San Jose, Calif., uses a tenant screening service called to screen rental applicants for her clients who want to rent their properties.

“As a property manager, you have a fiduciary duty to your clients,” Akin says. “You have to go through the data and pull as much as you can.”

When she runs a background and credit check on a potential tenant, she looks for people who have a certain credit rating roughly equal to a 600 FICO score. She asks for higher credit scores when renting out upscale homes or condos. She also looks at social media, county records and bank statements, among other things, to check for consistency.

Here are a few other ways landlords and property managers check credit:

  • Landlord associations. Organizations such as the National Association of Independent Landlords offer tenant credit reports to landlords for a fee. Depending on the association, these checks may count as hard inquiries and cause your credit to temporarily dip.
  • Tenant screening services. Some tenant screening services offer credit reports; others don’t. On, for example, landlords request a certain credit score range, and the site tells them whether the tenant met or exceeded that requirement. Reports also include evictions, bankruptcies and judgments, along with other background information. Because you initiate the check, it counts as a soft inquiry and doesn’t negatively affect your credit.
  • Credit bureaus. Equifax, Experian and TransUnion offer several credit screening products for landlords, including credit reports. These services require you to initiate the check, generally counting the pull as a soft inquiry.

Not all landlords and property managers do credit checks online. Some may request a copy of your credit report or ask you about your credit in person. You may want to make copies of your report, just in case it comes up.

The main credit-related deal breakers for renters

Landlords or property managers generally aren’t looking for immaculate credit, but certain negatives may make them more likely to reject an applicant.

“For things like repossessions of cars or credit cards being charged off, unless there’s a very good explanation, a landlord probably won’t approve that person,” says Dennis Johnson, credit and housing counselor at ClearPoint Credit Counseling Solutions in the St. Louis area.

Small mistakes, such as one late payment on an account that’s now current, tend to matter less, though. To landlords, the histories of accounts generally aren’t as important as their current statuses, Johnson says.

To be sure, good credit doesn’t ensure approval. Factors such as income, criminal convictions and past evictions can also play a big part in the approval process. Talk to the landlord to get a better idea of what he or she is looking for before applying.

How to rent with no credit

If you don’t have credit, find a family member or friend with good credit who’s willing to co-sign a lease for you. By co-signing, he or she is promising to pay the rent if you don’t. That’s a much 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. If you have a lot of savings, you could offer to pay several months of rent up front to lock down a deal.

Once you find a place, start building credit by applying for a secured credit card or getting your rent payments reported to major credit bureaus.

How to rent with bad credit

Renting with blemished credit can be more challenging, but it’s not impossible. A lot depends on the reasons your credit is low.

“If it’s because of unpaid student loans or medical bills, or a job loss during the recession, I may not be fazed, as long as the rest of their narrative is good, and their recent history is good,” says Mary Harris, who rents out a three-unit mixed-use building in the West Mount Airy neighborhood in Philadelphia. Rough patches are easier to overlook than chronic financial mismanagement, she adds.

Even with poor credit, you may still be able to get an apartment with a co-signer, a larger security deposit or advance rent payments. Sometimes, looking for an apartment in a lower price range can make it easier to find an offer with more flexibility.

If your score is low because you consistently lean on credit too much or you’re bad with due dates, consider trimming your expenses and working toward on-time payments. As you keep up with payments, you’ll likely improve your credit, too.

Know your credit

If you’re worried about what a potential landlord or property manager might find on your credit report, here’s a simple fix: Look first. The three free credit reports you’re entitled to every 12 months (one from each major credit bureau) include all the credit information the landlord will see, sometimes more.

You can’t control how a landlord or property manager might interpret a credit report, but if you already know what’s on it, you’ll be more prepared to answer questions and provide context, if you need to — and getting an apartment may become a bit easier.

Claire Davidson is a staff writer at NerdWallet, a personal finance website. Email: Twitter: @ideclaire7.


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