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What Happens When a Landlord Checks Your Credit

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You’ve found the perfect place to rent and now — gulp! — the property manager tells you all you need to do is fill out an application so she can run a credit check. Whether you’ve got great credit, bad credit, or no credit, it probably makes you a little uneasy: Will there be a problem?

In this guide, you’ll learn all about landlord credit checks, how to prepare yourself for one, and options if your credit isn’t stellar.

When Can a Landlord Check My Credit?

Landlords typically obtain permission to order a prospective renter’s credit report when that person fills out a rental application, though technically written permission isn’t required.

Who Pays for It?

Landlords often pass the cost of credit checks on to tenants in the form of an application fee. Concerned about paying that fee when you’re not sure you’ll be approved? You may not have a choice, but if you do, consider the DIY credit check strategies below.

What’s in These Reports?

Property managers and landlords will often order what are called “tenant screening reports.”  Reports may include any of the following:

  • standard credit report
  • credit score or credit rating (A-F, for example)
  • criminal background check
  • sex offender background check
  • unlawful detainer and eviction history
  • employment verification
  • OFAC terrorist search

“People don’t realize there is a full tenant screening. It’s beyond (a standard credit report) in most cases, particularly in the case of a large rental company,” says Rod Griffin, director of public education for Experian.

The format of one of these reports will vary, depending on the company supplying it, but in terms of credit data, it should generally contain the same credit information you would see if you ordered your own credit report.

What If There’s a Problem?

You must be provided with a written disclosure that includes information on how to order a copy of your report for free if information from a consumer report is used to take “adverse action” against you.  It’s not just a matter of having your application rejected, however. The Federal Trade Commission explains that this notice is also mandatory if the company renting to you requires you to get a co-signer, or charges you a larger deposit or higher rent due to information in your report. In other words, if the information in your report results in something negative, you’re likely entitled to this disclosure and you can request a free copy of your report.

Of course, the landlord may refuse to rent to you if it doesn’t like the information it sees in your report. So it’s best to check your own credit in advance and be upfront about items that may be an issue.

How to Rent With Bad Credit

What if you have bad credit? “Just because you have bad credit doesn’t mean you aren’t going to pay your rent on time,” says Matt Briggs, founder of ScreeningOne, a company that provides tenant screening services. Landlords know that renters don’t always have perfect credit, and they are often most concerned that you will pay your rent on time. But historically, information about rent hasn’t been included in standard credit reports and confirming on-time rent payments often involves a tedious process of contacting former landlords. That’s changing, though, and some rental payment history now appears on some credit reports.

“Experian was the first company to include positive rent information in credit reports,” Griffin explains. Experian gathers this information from three companies; ClearNow, WilliamPaid, and RentTrack. Tenants pay their rent through one of these online platforms and the payments are then reported to the credit reporting agency. Currently only positive rent payment history is reported. (TransUnion also reports rental payments when available.) It’s also important to note that you or your landlord have to sign up for one of these services for your rent payments to be included in your credit file.

Of course, if unpaid rent is turned over to a collection agency the collection account will likely be reported to the credit reporting agencies. Collection accounts can significantly lower your credit scores, and can make it more difficult to rent another place in the future.

How to Rent With No Credit

Students, immigrants and those who are newly divorced may have a particularly hard time renting for the first time if they haven’t established their own credit history. If they can find a place, however, establishing credit by paying rent through a company that reports rental payments can be very helpful in the future. In the meantime, a landlord may be willing to rent to someone with no credit if they provide a co-signer. (Here’s what you need to know about co-signers.) Or they may be open to renting to someone with no credit as long as they can pay the first and last month’s rent along with a security deposit.

How to Check Your Own Credit

If you aren’t sure whether you will be able to qualify to rent a new place, ask the property manager to take a look at the free credit report you’ve obtained to see whether it’s worth applying. You may also ask them if they will let you use a service such as Experian Connect that will allow you to purchase a credit report for a modest fee and then share it with others you authorize. The landlord may still want to obtain a full tenant screening report, but hopefully the initial report will allow them to tell you whether you even have a chance. (A service like that can also be helpful in the case of a landlord who has just one house to rent, or may even be renting out the basement or a room in their own home, and can’t obtain a full tenant screening report on their own, says Griffin.) Equifax offers a similar service called Identity Report and TransUnion’s service is called SmartMove.

Will you be renting a home or apartment in the not-too-distant future? Prepare yourself by getting your credit reports in advance. You can get your credit reports for free from all three major credit reporting agencies once a year. It’s also a good idea to get your free credit score to see where you stand — you can see two of your credit scores for free every month on Credit.com. The score the landlord requests may be a different number, but all credit scoring models generally take into account the same five factors: payment history, debt, account mix, age of credit history and new credit.

More on Credit Reports and Credit Scores:

Image: iStock

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