Why Landlords Look at Your Credit Report
Even if you have a steady job and enough money to afford the rent, finding a place to live has plenty of obstacles. Bad credit can be a big one.
You may think that your credit rating has nothing to do with whether or not you'll be a good tenant, but that doesn't change the fact that many property managers want to see your credit history before signing a lease. Think about it: If you've fallen behind on a loan or credit card payment in the past, a landlord might worry you'll do the same with your rent. Having a history that shows you reliably pay bills on time unsurprisingly appeals to someone whose livelihood relies on you paying your rent.
If any of the negative items on your credit report relate to paying housing costs, then you could be in serious trouble. Prior evictions or rent-related collection accounts on someone's credit report are highly predictive that the person will face eviction in the future, according to an analysis by TransUnion.
TransUnion uses collection records and other consumer report information (like evictions and other data on credit reports) to generate its ResidentScore, a credit score of sorts for potential tenants. These scores are designed to predict that person's risk of "negative resident outcomes or future evictions," according to a news release from TransUnion.
People with the highest ResidentScores (750 to 850) had the lowest eviction rate (0.2%) and those with the lowest scores (350 to 449) had a much higher eviction rate (12.3%). In an analysis of 200 properties, TransUnion found that 21.7% of tenants with prior evictions and 13.2% who had previous rent-related collection accounts had been evicted from those properties. Residents who hadn't been evicted had a much lower rate of previous evictions (5.2%) and collection accounts (6.2%).
Because other people with past evictions and rent collection accounts have repeatedly fallen behind on payments, having one of those negative entries on your credit report may hurt your chances of getting a lease.
Before applying for a rental home or apartment, it can be helpful to review your credit reports so you can explain the circumstances behind any derogatory information. You can also make an effort to improve your credit in advance of finding a new place to live. To get a sense of your credit standing, you can get your free annual report through AnnualCreditReport.com and get a free monthly summary of your credit report on Credit.com.
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