Residential Leases Part 3: Credit Check for Renters

An often overlooked step in securing a rental property is passing the tenant screening process, particularly a credit check for renters. It is very common for a landlord to ask prospective tenants about their history before agreeing to lease his or her property. Typically, a landlord will want to know about the prospective tenant’s criminal history and financial background. A landlord wants to feel confident that the tenant will take care of the property, that the tenant will not cause any legal problems, and that the tenant will pay the rent on time each month. Since past behavior is the best predictor of future behavior, the landlord will often conduct a background investigation that is likely to examine the prospective tenant’s criminal history, civil judgments, tax or property liens, bankruptcies, and their credit report and credit score.

Credit Check for Renters

There are three Credit Reporting Agencies which may provide a credit report and credit score to your landlord based on an authorized request. They are Transunion, Experian, and Equifax. These Credit Reporting Agencies receive information from Data Furnishers, which are the entities from which you have borrowed money or to which you owe money. These entities can include banks, collection agencies, credit card issuers, and other businesses. The Credit Reporting Agencies also receive information about criminal convictions, bankruptcies, liens, and civil judgments against you. When a landlord receives a copy of a credit report from one of the Credit Reporting Agencies, they can see the history for all accounts reported to the Agency usually dating back up to 7 years. Also included is a FICO score, which is a number ranging from 300 to 850 which is effectively a grade of the overall quality of your credit report. A high score indicates a positive credit history; a low score means that the credit history is not good.

Your FICO score is very important because a landlord may refuse to rent their property to someone with a FICO score below a certain threshold. Before trying to secure a rental, it is good to have an idea of what is on your credit report and what your credit scores are. The good news is that you are entitled to one free copy of your credit report from each of the Credit Reporting Agencies per year. However, beware of imposter websites! According to the Federal Trade Commission, only one website is authorized to give out your free annual credit report. To obtain a free copy of your credit reports, go to https://www.annualcreditreport.com.

If you discover that you have a low credit score, there are some ways to improve it. Make sure that you are paying all of your bills when they are due. Keep your credit cards and other lines of credit from getting close to the high end of your limit and pay off delinquent debt. Rather than putting all of your bills on one credit card, open a few different lines of credit and keep them all in good status, paying on them each month. If you find that some of the items on your credit report are inaccurate, you can dispute them under the Fair Credit Reporting Act by writing a dispute letter to the Credit Reporting Agencies or directly to the Data Furnisher. More tips can be found at the Consumer Financial Protection Bureau’s website at http://www.consumerfinance.gov/askcfpb/318/how-do-i-get-and-keep-a-good-credit-score.html.

If you do not have the time to improve your score, there are still some things you can do to secure your prospective rental housing options. When you meet your landlord, dress and act like a professional. Be honest about your financial and criminal history. If your landlord runs a background or credit check for renters, they will find out everything anyway, so it is better they hear it from you than read it on a report. Explain why you will be a good renter despite your history. Explain if there were special circumstances that led to past evictions or judgments against you, and explain what you have learned and how you have changed. Sometimes it is good to put what you want to say into writing for your landlord, so you will not miss anything. It also helps if you are willing to pre-pay for all or some of your rent obligation or offer a higher security deposit. Letting your landlord know that you are more than just a credit score could go a long way toward easing their concerns about renting to you and will start your relationship off on the right foot.

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