Credit scores; they’re the mysterious numbers that determine whether you’ll get approved for a loan, a mortgage, or a rental property.
If you’ve applied for an apartment before, you’ve probably been asked to provide a credit report. Credit scores are used to assess risk levels; they paint a picture of whether the applicant is at low or high risk of missing payments.
You might be wondering why your landlord needs your credit score. And if you’ve had financial trouble in the past, you may be looking for ways to boost your score. In this blog, we’ve set out to answer how your credit score impacts your apartment search:
A tenant’s credit report provides landlords with a closer look at your financial history. With this report, they can see the following:
Bankruptcy can happen to anyone. It may result from an unexpected life event (such as a house fire or the loss of a loved one), serious illness, job loss, or failed business. If you file bankruptcy, it will appear on your credit report for 6 years after the discharge date.
A credit report reveals any outstanding debts, credit card payments, or loans that you have. It will also show if any of your debts have been sent to a collection agency.
Landlords will consider someone’s debt load before approving them. For example, a tenant with a great deal of student debt and outstanding bills may be less likely to pay the rent on time.
Your credit score is affected by things like:
Do you pay your bills on time? If you’re consistently late on making payments, this will be reflected in your credit score.
If your credit score was affected by a particular event, consider talking to your potential landlord about it. For example, you might have gone through financial turmoil due to a divorce, the pandemic, or job loss. If you’re worried that your credit score may affect your chances of getting approved, having an open and honest conversation may be your best bet.
How does your credit report compare to what’s considered “good” or “bad”? Here’s a breakdown of what the scores mean:
If your score is around 660 or more, then you’ll have a good chance of being approved for a rental.
If you score in the higher range, nice work! You’ve been responsible with your credit cards, and it’s paid off. But if your score needs work, don’t fret; there are plenty of ways to improve it. We’re going to explore that in the next section.
If this is your first time renting an apartment, you might not have a credit card or a limited credit history. In this case, your landlord will use other information to assess your risk level, including employer references and paystubs.
You’ve probably heard that checking your credit score is a bad thing. But that’s not necessarily the case. To clear this up, we’re going to define the two types of credit checks:
If you have a low credit score, you might worry that it will cause you to lose out on a great apartment.
By working on your credit score, you can improve your chances of getting approved for an apartment.
What can you do to increase your credit score? We’ve put together a few ways you can build healthier habits with your credit card. Try to practise the following:
Every credit card has a limit. If you go over this amount, it will impact your credit score.
In addition, try not to utilize too much of your available credit. Use your debit card or cash to lower your reliance on your credit. As a guideline, try not to use more than 30% of your available credit.
If you’re concerned about going over your credit limit, consider applying for a higher one!
If you have one or two credit cards, you don’t need to worry. Having two cards can help you keep your credit utilization low. But if you apply for several cards (especially within a short time), it may impact your credit score.
If you have trouble remembering to pay, set reminders once or twice a month. This will ensure you always make your payments before they’re due. Alternatively, you can make a note to pay whenever you get a paycheque (for most people, that’s twice a month).
Here’s another tip: Connect any monthly payments to your credit card. This can be anything from a gym membership to your internet bills. These payments will automatically be withdrawn and paid each month.
If you don’t yet have a credit history, this is a great way to start establishing it. Making those payments consistently can help boost your credit score.
Accidents happen; sometimes, you may have a low credit score through no fault of your own. If you see any errors on your credit report, be sure to notify the credit reporting agencies so it can be corrected ASAP.
Contact the credit reporting company that provided you with the score. You should see your credit score increase once the issue is resolved.
If you’re on the hunt for Winnipeg apartments, check out our listings! At Globe Property Management, we do run credit checks; however, the applicants aren’t required to provide them. We perform the tenant’s credit report at our office.
We’re happy to help you find your future home. Browse our apartments today!