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Why do landlords check credit?


Credit checks give landlords a reasonable indication of your renter reliability. Landlords and property managers associate strong credit history with a higher likelihood to pay rent on time and in full. Basically, if you manage bills and debts responsibly then you probably will pay your rent without any issues.

No landlord wants to evict tenants. Evictions cost a lot of money, sometimes as much as $10,000. Evictions also take a lot of time and energy. Both landlords and tenants prefer to avoid this kind of situation altogether.

What’s more, rental properties only create a limited amount of income. Each unit rented produces a certain amount of rent for the length of a lease. If a tenant misses rent that month, it’s a month of income the property never gets back.

For example, let’s assume a property charges $1,000 for an apartment with a 12-month lease. If the property manager spends 1 month evicting a tenant and 2 months searching for a new renter, then altogether the rental loses 3 months of income or $3,000. That’s 25% of the total lease that the landlord loses forever.

Generally, landlords look for 3 key trends in a credit check. Our team dives into the details below so that you know what to expect as a prospective tenant.

3 key trends landlords look for in a credit check

Good payment habits

Above all else, landlords value consistent and on-time payment history. A credit check reveals if you have experience regularly making on-time payments across all your credit accounts, open or closed. The more history in your credit report, the more confident your landlord may be that you will be financially responsible.

Some landlords report your rental history to credit bureaus. When you apply to rent a home, your future landlord can use this information to understand if you have any outstanding balances on prior leases or if you have a history of consistently paying on time.

Manageable debt

Landlords and property managers want to ensure that tenants can manage their existing monthly debt payments in addition to a new monthly rent expense. The simplest way to do this is by comparing your current monthly debt payments with your monthly income. If you have more monthly debt payments than income, you likely cannot afford to also pay for a new lease.

Clean public records

Independent from your payment history, public records with negative information may stay on your credit report for 7 to 10 years. Public records can contain history of bankruptcy, foreclosure, tax liens, and lawsuits – all items that may indicate you previously stopped paying financial obligations. Even if you make consistent on-time payments and maintain manageable debt balances, landlords may still prefer to see a clean history of public records as an additional measure of financial responsibility.