Landlords and credit checks: What you should know

When you’re looking for a new apartment or home to rent, credit checks are an important part of the approval process. Not only do landlord credit checks help property owners and managers find out if you’ve paid your bills on time in the past, but they can also help determine how much rent you can afford to pay each month.

If you’re wondering how a landlord credit check works and the types of information landlords see when looking at a renter’s credit history, you’re certainly not alone. Read on to find out everything there is to know about landlord credit checks, including the information that’s included and steps you can take to improve your chances of getting approved for a rental.

What do landlords look for in a credit check?

Landlords use credit checks to get a general idea of how you managed credit in the past. For example, they want to find out if you have a long history of on-time payments on various bills you have owed and if you have any delinquent accounts or accounts in collections.

Property managers also check for bankruptcies in the recent past, and having one can make it difficult to get approved for a rental home or apartment. However, some experts say that bankruptcies are less likely to impact your ability to rent if the filing date is several years old.

Lastly, landlords use credit checks to find out if you’ve been previously evicted from a rental home or apartment. If you have been removed from another rental for nonpayment, that’s a huge red flag for landlords and a signal that you may be an unreliable tenant.

What can a landlord see in a rental credit check?

According to the Consumer Financial Protection Bureau (CFPB), most landlords and property managers use something called a “tenant screening report” to vet potential tenants, which is not the same thing as a regular credit check like is performed when you apply for a credit card. This type of rental background check includes a range of information that helps them determine if you’re a good candidate for a rental.

Tenant screening reports allow landlords to see the following:

• Public record filings, like bankruptcies and tax liens
• Eviction reports
• Criminal records
• Judgements from a court
• Credit inquiries and history
• Income information
• Social Security number
• Aliases
• Current and previous employers and addresses

Potential renters and tenants do have certain legal rights when it comes to tenant screening reports thanks to the Fair Credit Reporting Act (FCRA). Specifically, landlords are legally required to tell renters if they were denied a lease or charged higher fees based on the information in this report. Landlords and property managers are also required to provide consumers with the address, phone number and name of the company that provided the report. Potential renters are entitled to a free version of this report from their landlord if they request one within 60 days.

Also be aware that credit information landlords can see is limited to what is actually listed on your credit reports. The CFPB notes that negative information like late payments or judgments against you can stay on your credit reports for up to seven years, whereas bankruptcies can stay on your credit reports for 10 years.

Is a rental credit check a hard or soft inquiry?

Most landlord credit checks are soft inquiries, which allow them to see the information in your credit reports and public records without impacting your credit score. However, some rental credit checks come in the form of a hard inquiry, which require tenants to give their permission upfront.

While hard inquiries on a credit report can temporarily ding a consumer’s credit score, they don’t have a long-term impact.

Can I rent if I have bad credit or no credit history?

Whether you can rent with bad credit or no credit depends largely on the landlord or property manager in question. While large rental companies typically require a landlord credit check to approve new renters for a property, smaller “mom and pop” landlords are less likely to go to the trouble.

Further, some landlords are willing to rent to those with poor credit if they provide a larger upfront security deposit or several months of rent upfront. It’s also possible to find apartments specifically available to those with bad credit and that may not require as high a security deposit. Apartments based on income are typically targeted to those who need affordable housing but may not meet the credit and income requirements of other landlords.

Renters with bad credit who need help getting approved can also inquire about getting a cosigner. If a family member or other trusted person is willing to cosign for an apartment or rental home, their positive credit history and legal responsibility for payment can make it easier to get approved.

What else do landlords look at?

What do landlords look for in a credit check? A range of information can be used to approve or deny new tenants, including the following:

Background check

Landlords often run a background check to see if potential tenants have any prior criminal convictions and lawsuits on their records. This information is typically included in the tenant screening report, per the CFPB.

Income

Landlords also need to have an understanding of your income and how consistent it is. After all, income is used to pay rent, and they need to make sure it’s sufficient to meet the obligations of your lease.

Having a strong income and a lengthy employment history can increase your approval odds for a rental. Contractors or self-employed individuals may be required to provide two years of tax returns, share bank statements or get a letter from their accountant to prove that they have consistent enough income to qualify for the rental.

Listed references

A landlord may ask for references from people who have rented to you in the past to vouch for your tenant candidacy. If other landlords who have rented to you in the past are willing to advocate for you as a tenant, you have a better shot at renting a new place.

Important: While it’s possible to be denied a rental based on financial factors, landlords are prohibited from discriminating against applicants based on other details per the Fair Housing Act. Specifically, individual and corporate landlords are prohibited from discriminating against applicants based on race or color, religion, sex, national origin, familial status and disability. Landlords can charge a fee to run a credit check (typically $30-$50) in certain states or in cities that allow brokers to serve as middlemen.

The bottom line

The exact process landlords use to approve new tenants for an apartment can vary, but most will run a credit check at the very least. This gives them the opportunity to find out how you have used credit in the past, and if there are any “red flag” signals on your record like bankruptcies or evictions.

Generally speaking, you’ll have the best possible chance of getting approved for an apartment or rental home if you have a decent credit history, a steady job history and a reliable source of income. If you do have some skeletons in the closet like a bankruptcy or a judgment from the courts against you, it can help if these situations are at least several years in the past. Beyond that, take steps to build your credit, such as opening and responsibly using a secured credit card, paying all your bills on time and otherwise practicing good financial habits.