Credit check

What are homeowners looking for in a credit check?

SAN JOSE, CA., July 21, 2020 /PRNewswire/ — Paying rent on time is one of a landlord’s top concerns. So, to better gauge which applicants are most likely to pay on time, landlords can use credit information to screen tenants. If you’re wondering what credit information you’ll need for your next rental, here’s what you need to know, from myFICO.

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Renter credit checks are different from traditional loan credit checks that measure your creditworthiness or how risky you are to a borrower. Landlords focus more on your actual credit information rather than deciding rental agreements based on your credit score alone.

When credit scores are considered part of your overall credit information, a score above 670, out of a FICO® score range of 300 to 850, generally indicates good creditworthiness. However, you should not focus on a specific credit score number. The threshold may vary depending on the apartment, your local rental market, your income and the rent. As a reminder, your FICO score doesn’t factor your income into its calculation, so that’s something the owner will consider separately in their decision.

A credit score below 670 does not automatically mean your application will be denied, but a landlord may take a closer look at your credit details if your score is in the mid-600s and below. In a competitive rental market, the higher your credit score, the better.

What happens in a rental credit check

Landlords look at more than your credit score to assess your rental application, that is, if they consider your credit score. Some landlords only look at your actual credit data, focusing instead on your payment history. Regardless of your credit history, landlords consider the ratio of your monthly income to monthly rent to ensure you can pay the rent.

Some landlords use tenant screening services or rental-specific credit scores to approve applicants. Landlords can even opt for a service that automatically screens tenants based on certain risk factors such as debt-to-income ratio, number of bankruptcies or overdue accounts, and criminal history.

Your credit doesn’t have to be spotless to be approved for an apartment. A few late payments or high credit card balances may not be grounds for rejection. However, having an eviction on your record puts you at a higher risk of having your claim denied, especially if you still have an outstanding balance related to the eviction. You might also have a harder time getting approved if you have other serious defaults like default, bankruptcy, foreclosure, repossession, or write-offs.

Rent without great credit

If you don’t meet the credit criteria, all is not lost. There can be several ways to get your foot in the door, depending on the owner. To start, you may be able to pay a higher security deposit or cover a few months’ rent up front. Paying more money up front can eliminate some of the risks associated with your previous credit mistakes.

Having someone vouch for you, either rental references or a co-signer, can give you extra credibility. Or, in the case of a co-signer, another person shares the risk with you, which can make getting approval easier.

You may also have more success with an individual landlord rather than a property management company whose rules tend to be less flexible.

On the other hand, a higher credit score doesn’t get you a better rental rate, but having good credit can give you the advantage of moving in with little or no security deposit requirement.

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About myFICO

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