What is a Credit Report for Renters?

If you’re looking for a new apartment, chances are you’ve had to complete at least one or two rental applications. Before a landlord or property manager accepts your application and you can move in, they will often do a credit check to get a credit report on a potential tenant. Your credit report could therefore make or break your request.

Learn about tenant credit reports and why they are important so that you have a better chance of getting the next apartment you are applying for.

What is a credit score and why is it important?

Let’s start with the basics. What is a credit score and why is a credit report for tenants important?

A credit score is a number assigned to each person to demonstrate their creditworthiness. The score ranges from 300 to 850, and the higher the number, the better your credit score. Landlords and potential lenders often look at a consumer’s credit report to see if a tenant or potential borrower is trustworthy and likely to pay rent or repay loans on time.

This credit score system was designed by the Fair Isaac Corporation and is also known as your FICO score. It is the most commonly used way to assess a person’s credit rating.

Your credit report can have a huge impact on all aspects of your financial life, including your ability to rent an apartment or a house. As a general rule, the owner and property managers generally expect a potential tenant to have a credit score of at least 640 or higher. If your credit score is lower than that, it can be difficult to find an apartment to rent. You may also need to pay a higher rate on mortgages or have a shorter repayment term on other types of debt. You can always write a letter explaining your low credit score to a homeowner if there is an explanation for such a low number.

What is a credit report for tenants?

In addition to your overall credit score, a potential homeowner can view your larger credit report. This report contains more detailed information about you as a borrower and your rental history.

Besides your credit score itself, there are a few other pieces of information that a homeowner will look at in your credit report. They’ll likely be interested in knowing if you’ve ever filed for bankruptcy, been evicted, broken a lease, convicted of a felony, and been financially active enough to build your own credit history. Having any of these items on your credit report can be a reason for a landlord to accept or reject your rental application.

How is my credit score calculated?

Five main factors go into every credit score:

  • Payment history
  • Length of credit history
  • Types of credit
  • New credit
  • Total amount due

There are three major credit reporting agencies in the United States that track consumer credit scores and reports: Equifax, Experian, and TransUnion. Your score may vary slightly between the three credit bureaus, but overall, each of the three uses the same factors to calculate your credit score.

How can I improve my credit rating?

If you are trying to rent a new apartment, be sure to research your credit score first before completing a rental application. You are allowed to get a free credit report from each of the three credit bureaus each year, thanks to the Fair Credit Reporting Act (FRCA). Many credit cards or banks will also provide you with a free credit report if you have an account.

Tracking your credit report gives you the opportunity to correct any potential mistakes before a potential homeowner sees it. You are able to dispute potential errors through the three major credit bureaus. Allow yourself a few months to clear up any discrepancies, as the credit bureau has 30 days to respond and correct any erroneous information after you submit a claim by phone, email, or online.

If your credit score isn’t great, there are several things you can do to improve it. Paying your bills on time, paying off your debts to reduce the amount of overall debt you owe, and managing your credit cards effectively will all help improve your credit score. If you don’t have a credit card, you’ll want to get one to build your credit history, but don’t overspend or open a lot of accounts in the hopes of improving your credit score.

Since all of these strategies take time to actually improve your credit score, be sure to check your credit score periodically, even if you may not be looking for an apartment right now. This will give you plenty of time to work on your score if you find it to be lower than you had hoped for.

How to rent an apartment without credit or bad credit

While a lack of credit history or bad credit can make renting more difficult, don’t despair. There are still things you can do to compensate for poor credit in your application. For example, many property owners or managers will allow a friend or family member who has good credit to co-sign a lease with you, guaranteeing that they will pay the rent if you don’t. Obtaining a guarantor is also an option. If you have significant savings, you can also offer to pay several months’ rent up front as security or pay a larger security deposit.

Learn how to get a tenant credit report and what your credit report means before you complete your next apartment rental application.

Cover image via iStock.com/LightFieldStudios

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