February 13, 2018
What Do Property Managers Look at During a Tenant Credit Check?
So, you found the perfect apartment, and now the landlord tells you all that’s between you and your dream dwelling is a tenant credit check. Uh oh. Do you know what a landlord or property manager looks at when they run a credit check? If you’re on the lookout for a great new place to live, you might want to explore what factors in the final decision to rent or not rent.
With increased competition in the rental marketing, more and more landlords are checking credit reports to ensure they have the best possible tenant. In fact, it’s one of the top deciding factors on whether or not your application is approved. Property professionals are now often automating the tenant screening process, with online credit checks and approvals conducted by a software program to ensure there is no bias.
7 Things to Know About Tenant Credit Checks
1.) Credit checks are legal, but you need to give permission. Yes, the landlord has every right to see who may be living in their rental unit. They will need your permission, and expect to supply your name, address, birth date and SSN number. To run the report, the property manager may use services offered by landlord associations – like the National Association of Independent Landlords, — tenant screeners, and/or major credit bureaus, like TransUnion. If you want to be proactive, you can even ask a credit bureau for your own report, to see what “red flags” there may be, if any. (And, as we explain later, this might be a best-practices approach.)
2.) Not all tenant credit checks are the same. Some landlords may get a simple report that just lists your credit score (ensuring it is equal to about a 600-620 minimum FICO score), while others may do a deeper dive. These tenant screening checks are more in-depth, and look at credit score as well as look for things like loans and debts, previous evictions, bankruptcies, criminal checks and employment verification. More thorough landlords or property managers may review your social media accounts or public bank or legal statements.
3.) Okay, so what are some of the common factors landlords look for? Generally speaking, all credit scoring models that into account these considerations:
- Total debt amount
- Payment history
- Account mix
- The age of your credit history
- New credit accounts
4.) Will running a credit check on me negatively impact my credit? Sometimes credit checks by a third-party count as a “hard inquiry” and may have a temporary negative impact on your credit. However, if YOU initiate the check, it counts as a “soft inquiry” and doesn’t affect your credit. Credit firms like TransUnion and Equifax have specialized solutions for property firms, and these services require you to initiate the credit check. (Having no impact.) Running your own history from time to time can be beneficial, as many people have found errors on their credit reports.
5.) What are the big BAD things that landlords are looking for? We’re all human, and many of us have made mistakes that affect our credit in our lifetime. However, the major deal-breakers for landlords are:
- Accounts currently in collections
- Credit card charge-offs
- Major repossessions (homes, cars, etc.)
- Past evictions and criminal convictions
6.) I’m a student, I have no credit history. Now what? In the case of students, the landlord may require a guarantor – someone with good credit who will co-sign with you, promising to pay the rent if you cannot. You might want to consider getting a credit card, using it once or twice and paying the bill promptly on time to start building your credit history.
7.) I have bad credit. Now what? Well, it really depends on what type of bad credit you have. Everyone has a rough patch, and these can often be overlooked, but if you recently were evicted and have accounts in collections, the odds are not in your favor. But, it’s not impossible. Just like in the student scenario, you might want to provide some background information or give some context to your fair-to-bad credit. You can also offer to have a co-signer on your lease to reduce the risk, or pay a larger security deposit, or make rent payments in advance.
How Property Vista Helps
Property Vista helps property managers quickly and effectively accept online applications and instantly screen tenants. Our AI algorithm scans 30+ areas including credit score, debt, income and required rent. If you’re interested in saving time and money during the application and screening lease cycle, we can help. Learn more about our tenant screening tool!