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A credit score for renting in Canada is pretty much a necessity at this point. And without rental credit check success, expect a delayed move-in date until you do. The best defence against a prolonged house hunting process is preparation. Here is a list of frequently asked questions to help you move into your new home on time.
What is a credit check for renting, and what do tenant credit checks look for?
The most important thing to a prospective landlord is timely rent payment. Simply put, landlords are looking for someone who, in all likelihood, would pay their rent on time and the best way to evaluate which applicants will likely pay on time is through a rental credit check.
It's worth noting that rental credit checks for rental applications are different from traditional loan credit checks. While lenders may focus on just your 3-digit number, landlords are more interested in your actual credit history. Rather than deciding rental worthiness on your score alone, it's much more valuable to your potential landlord to view the information that makes up your total score, such as your financial history.
What can landlords see on a credit check, and does rental history show up on a credit report?
To help a landlord make sure applicants can afford the rent and pay on time, landlords will request a credit check to look at the financial history, which means rental history does show up on a credit report.
From your financial history, landlords can determine the following:
• Creditworthiness—based on your credit score
• If you pay your bills on time, defaulted on any loan, or if you owe rent to a previous landlord.
• If you have outstanding bills or accounts in collection
• Public records such as bankruptcies or consumer proposals
In today's increasingly competitive housing market, knowledge is power. It's imperative to keep tabs on your credit score and monitor your credit history to know what a landlord will be looking for when reviewing your rental application, especially if you have bad credit.
What is considered bad credit for renting?
Before we discuss what bad credit is, let's talk about good credit. Depending on the scoring model, credit scores can range anywhere from 300-900. According to the Canadian Equifax score model, scores between 660-760+ are considered good to excellent. While scores from 560-659 are fair and scores in the 300-559 range are considered poor.
Based on the Equifax model, a score of 660 and above would be ideal for a rental application. But keep in mind the desired scores vary depending on the apartment, local rental market, income, rent amount and other factors.
As mentioned before, landlords are looking at the overall credit history to determine if an applicant will pay rent on time. Your income does not factor into your score. As such, landlords will consider your income as a part of their decision separately.
However, if you have poor credit and are in the market for a new home, there are a few things you can do now to ensure a favourable outcome:
• Get a cosigner—someone who is trustworthy and creditworthy.
• Check your credit report regularly to dispute errors or inaccuracies.
• Provide proof of income using bank statements or an employment letter
• Keep credit utilization low and avoid applying for new credit or acquiring hard pulls just before a rental check.
• And finally, if all else fails, you can always appeal to the landlord's sympathies through a cover letter to explain your situation and how you plan on improving.
How much does a credit check cost?
Credit check fees are almost always up to the renter to tackle. Canadians can request a free full credit report once a year from TransUnion Canada or Equifax Canada. If you need a report sooner, both credit bureaus offer credit reports for a monthly fee. Equifax provides a 30-day free trial, and TransUnion allows consumers to order a credit report online once a month for free.
Some landlords may use a third party to conduct a credit report which you consent to on a rental application. But it is always worth asking a potential landlord if you can provide them with a copy of your credit report to avoid the hard pull.
If you have questions about credit checks, rental applications or general inquiries about Junction Factory, please don't hesitate to contact us. One of our knowledgeable representatives is always happy to help.
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