We’ve written extensively for landlords on how to request, read, and use a credit check to rent a property, but we haven’t fully covered what to expect if you’re a tenant whose applying for a rental that requires credit check. How will it affect your chances and how can you prepare? We’ll discuss below.
Understanding Your Credit Score
First things first: you should know your own credit score and what it means before you wonder about what potential landlords are going to be seeing. That way there are no surprises and you know how to respond if they have follow up questions. The Fair Credit Reporting Act ensures that consumers like you have the right to know what’s on file for them with one free file disclosure every year from all major credit bureaus. There are tons of apps and websites that claim to get you your free credit report, and you can use them if you want, but you can also go directly to AnnualCreditReport.com and order. It’s the only “official” source for ordering your free reports, authorized by federal law.
Once you have your report in hand, you need to know how to read it. The three major credit bureaus are TransUnion, Equifax, and Experian. Each of these now use VantageScore, which is a competitor of the traditional FICO score. You can read more about what that means on this VantageScore post. At its inception, VantageScore was on a different scale than FICO, which made it more confusing, but they recently moved to a similar score range model. The range for both VS and FICO is 300 to 850, and to make a complicated concept very simple, the closer you are to an 850 score, the better your credit. A “good” score is considered anything over 690 and an “excellent” score is anything above 720.
So now you have the hard numbers. Great!
Is your number less than ideal? It’s not the end of the world (or the end of your housing prospects). These scoring systems are based on a variety of factors including payment history, amount of credit you’re using, the amount of time you’ve had credit, your new credit applications, and more. Opening a new credit line can cause a temporary “ding” to your score that can take a few months to recover from, and if you’ve missed payments in the past, that may have created some scratches on your record. Sometimes people fall on hard financial times and have a rough period that they’re slowly recovering from. With the recession in our recent past, most landlords are very familiar with seeing such patterns in their applicants’ reports.
The key to dealing with a less-than-perfect credit score is showing that you’ve been making steady progress toward rebuilding it. On-time payments, paying down your credit lines, and generally being a responsible consumer are all behaviors that are going to show up on your report. If you can show a landlord that you understand your credit and have been taking real steps toward improvement, they’re going to take note. The nice thing about a full report is that it gives a landlord or property manager the full picture of who you are financially, which is good news if you’ve been working to make improvements. You don’t have to worry about an out-of-context number on the paper and hoping for the best.
If you have other questions about how to use a credit check to rent a property, let us know!
If you’re a landlord or property manager looking for a reliable tenant screening program, we recommend our RentalConnect program. RentalConnect offers property owners and landlords a great alternative to the expense of full tenant screening. This service requires no on-site visit, sign-up, or membership fees, making it extra convenient. The $34.95 service fee is paid by the applicant. Available 24/7, RentalConnect is fast, easy, secure, and delivers reports needed to make an informed decision, including a credit report, a national criminal search, and a national eviction search.
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