Why Landlords Do a Credit Check (and What They Look For)

Unfortunately in life, your past mistakes often have the uncanny tendency to haunt you, long after you made them. This is especially true when it comes to financial mistakes and your credit. Credit problems, in fact, have the ability to hang around on your credit reports for sometimes up to a decade.

Because your credit is routinely used by others to judge whether or not they want to do business with you, any problems on your credit reports can make certain aspects of your life much more difficult and expensive. One of those times is when a landlord checks your credit during your search for an apartment or rental home.

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    What Do Landlords Look for in Your Credit?

    Many businesses rely on your credit to assess the risk of doing business with you. Landlords are no exception. When landlords check your credit for tenant screening purposes, what they’re actually doing is trying to determine whether you’re likely to pay your rent late (or perhaps even not at all). Tenants who don’t pay their rent as agreed can cost landlords tons of money and even more aggravation. These are inconveniences any landlord naturally wants to avoid, if possible.

    When checking your credit, landlords will generally request what is known as a tenant screening report from one of the credit reporting agencies (and often you’ll be required to pay for the report yourself as part of an application fee). Tenant screening reports typically contain much more information than a standard credit report and provide landlords with information to help them make informed decisions about new rental applications.

    Your credit is certainly not the only thing a landlord will consider when reviewing your rental application; however, even if the rest of your application shines, your bad credit could still cost you the opportunity to sign a new lease. Here are a few of the red flags landlords may look for on your credit reports that could potentially cause your application to be denied.

    1. Public Records and Major Derogatory Events

    Previous evictions, foreclosures, judgments, and bankruptcies can all make renting a new place to live quite challenging. Collection accounts, repossessions, and charge-offs can also spell trouble for you when you’re filling out a new rental application.

    Unless such issues are in the past and you have a good explanation as to why they happened in the first place (e.g., a job loss or illness) a new landlord is more likely to turn you down if they see any of these problems on your tenant screening report, especially if they’re fairly recent.

    2. Debt Problems

    If you’re overextended financially, as demonstrated by a large amount of debt on your credit reports, you may have trouble getting your new rental application approved as well.

    Just like a mortgage lender, landlords will often calculate your debt-to-income ratio (DTI), which is the percentage of your monthly income already committed to other outstanding debts, to determine how much money you have left over each month for rent. If your DTI comes in at over 45% to 55% (depending on the landlord), you could potentially be turned down for a new rental even if the rest of your credit checks out. Point being, if you can’t afford it, you can’t afford it.

    What You Can Do If Your Credit Costs You the Opportunity to Rent

    If your tenant credit check comes back with some blemishes that cost you the apartment, it doesn’t mean you’re out of options. Here are a couple of strategies to try:

    1. Offer to put more money down.

    If you offer to pony up several months of rent in advance, it may make a landlord willing to take a risk in renting to you, even if your credit problems are concerning. Putting extra money down lessens the landlord’s risk in the event you ever stop paying your rent as agreed in the future.

    To a landlord, money talks… and loudly. I once had an applicant whose credit was so bad I told him the only way I’d rent to him was for him to pay the full amount of the lease in advance.

    2. Search for another landlord.

    While tenant credit checks are commonplace when it comes to rental applications, not every landlord will perform a credit check during their tenant screening process. Even those who do might still be willing to accept an explanation of your past credit problems, especially if you’re applying to rent from an individual owner rather than a larger property management company.

    If you can prove that your credit mistakes are behind you and demonstrate that you’ve taken steps to turn over a new financial leaf, then you may be able to convince a landlord to take a chance on renting to you in spite of your previous credit problems.

    John Ulzheimer

    Contributing Writer

    John Ulzheimer is an expert on credit reporting, credit scoring, and identity theft. The author of four books on the subject, Ulzheimer has been featured thousands of times over the past decade in media outlets including the Wall Street Journal, NBC Nightly News, The Los Angeles Times, CNBC, and countless others. With professional experience at both Equifax and FICO, Ulzheimer is the only credit expert who actually comes from the credit industry. He has been an expert witness in over 230 credit related lawsuits and has been qualified to testify in both federal and state courts on the topic of consumer credit.