What does a landlord look for in a credit file?
By Erica Sandberg
May 5, 2015
I can't believe I'm asking about such a rudimentary topic and one that most people in America probably already understand, but here goes: What is a good credit report to a landlord? What do I need to have on it? I'm an adjunct professor and need to move for my new position in the Bay Area. As the housing market is exceptionally tight, I hear my report must be perfect. What should I have placed on it and how much does it cost? –Karen
Don't concern yourself with what other people know or don't know! It's irrelevant to your situation. You need correct information on an unfamiliar subject and until you get it, no one's expecting you to be an expert. Therefore, I'm glad you enrolled in my special course: “Credit Report 101.” I suspect it will be an easy A.
It is true that most landlords and property managers will want to view your consumer credit report so they can obtain a clear idea of how you've managed your financial obligations. That's certainly relevant information to someone renting out a home. While you may present a current report to them when you tour a home and find that you like it enough to sign a lease, usually they will ask for your permission to pull one themselves.
Before it reaches that point, however, get your own reports and check them first. They are available from AnnualCreditReport.com, and you can pull one copy per credit reporting agency (TransUnion, Equifax and Experian) for free once per year. The credit reports are used by dominant scoring model FICO to rate you on a scale of 300 to 850, with 850 being perfect. Lenders and landlords are looking for a score that is above 700 — 750 if they only want the best. You can access your credit scores for about $20 each at MyFICO.com.
It sounds like you've never seen your credit reports before, so prepare yourself for a bit of confusion. These are not eloquently constructed term papers, but reports that are filled with abbreviations, numbers and letters that mean something to the businesses that use them to determine risk.
There are four main sections of the reports:
- Personal information. This is where your name, Social Security number, mailing address and other identifiable information is, so read it over to ensure all is correct. While none of this impacts your credit score, it's important that it remains accurate.
- Trade lines. Have any student or car loans? What about credit cards? If so, you'll see them here. Pay close attention to the amount of debt you may be carrying and your payment history details, which make up 65 percent of your FICO scores. Anyone assessing your financial wellness for a rental will want to be sure that you're not overwhelmed with liabilities, as that might make meeting the rent difficult. Nor do they want to see that you've missed payments or have allowed accounts to be sent to collection agencies.
- Public record. If you've been sued and owe a monetory judgment, filed for bankruptcy or have a lien placed on property, evidence of it will be here. Clean as a whistle? This section will be blank — which is what you want.
- Inquiries. When you apply for a loan or credit card, a hard inquiry will be placed on your file, which indicates that the lender was allowed to check your report for consideration. A third party accessing it for a rental may trigger a hard inquiry too, but pulling your own credit report does not. Outside of that, other businesses are free to look at your file to see if you might be right for their products, and you'll see who did so. Too many hard inquiries can impact your score, so don't go crazy and apply for multiple cards.
Know that you, the consumer, do not add anything directly to the reports. Creditors send that data to the credit reporting agencies. However, you have the right to dispute inaccurate information, which you should do, even if it seems unimportant, such as an incorrect former address. Incorrect data can mean ID fraud and can eventually wreak havoc on your credit.
By now you should be able to take an educated guess on what a landlord or property owner will want to see: evidence that you're financially responsible by paying your bills on time and keeping debt low. If you do identify areas on your report that don't make you look so wonderful, take action. You can't remove negative information before its time is up (seven years for delinquencies and collection accounts, for example) but you can dispute errors, delete debt and start paying on time.
Oh, you may have noticed that I don't mention income, because what you earn is never on a credit report. Instead, you would list it on your rental application.
In the event that you have a “thin” or no credit file because you are new to the country or are new to credit in general, you may have to cough up a little extra cash as “insurance” to a potential landlord in the form of several months' rent. I'm not promising that will work, but it may help when your credit report isn't in the best shape. You should know where you stand after you pull your reports and scores on whether you'll have to resort to paying more upfront to prove that you are a trustworthy individual.
Got a question for Erica? Send her an email.