Rental credit checks are a standard practice among landlords and property managers in Canada to ensure that potential tenants are financially capable of renting their desired properties.
In this article, you’ll learn everything you need to know about rental credit checks, including what rental companies look for in them, who’s responsible for their costs, and the ideal credit score to pass them.
Key Takeaways
- Rental credit checks provide landlords with a means to assess whether prospective tenants are financially responsible enough to fulfill the rental payment terms and conditions.
- While there isn’t a specific minimum credit score requirement for renting in Canada, having a credit score of at least 660 is ideal for a higher chance of approval.
What is a Rental Credit Check?
A rental credit check is a standard procedure where a landlord examines a potential tenant’s credit history. This practice is legal and common in Canada, but it’s worth noting that landlords must obtain written consent from tenants before credit checks take place.
There are several ways landlords can conduct credit checks on their tenants. They can request this document directly from a credit bureau or use tenant screening services. Alternatively, landlords can directly ask tenants to bring their credit reports themselves.
Why Do Landlords Need to Check Your Credit?
Landlords check your credit history to ensure you’re financially responsible enough to follow the agreed-upon rental terms.
After all, your credit records include your credit score and an overview of your previous financial behaviours, including your outstanding debts, payment transactions, and credit history duration.
What Do Rental Companies Look for in a Credit Check?
Although your credit report includes a lot of information, rental companies often focus on a few of them when doing a credit check.
Credit Score
The credit score is one of the most objective ways to measure how financially responsible a Canadian resident is. Since this score is directly affected by your credit history records, the higher it is, the higher your chances of being approved by the landlord to rent a property.
Payment Habits
Your credit report includes a comprehensive overview of all your payment history on your credit accounts. Through these records, rental companies can quickly check if you often pay on time or miss your payments on various accounts, such as your credit cards and loans.
Current Debt Load
Rental companies will also check whether you can still afford to rent the property you want on top of your debt repayment obligations.
Derogatory Remarks
Derogatory remarks, such as previous eviction records and/or property foreclosures, are considered red flags in your records as they indicate that you are not financially organized.
Related: Hard vs. Soft Credit Check
What is the Minimum Credit Score for Renting an Apartment in Canada?
There’s no standard minimum credit score for renting an apartment in Canada.
However, as a rule of thumb, aiming for a credit score of at least 660 is highly recommended if you want to have little to no problems renting a property. That’s because this score is considered a starting point for achieving a “good” credit rating in the country.
Who Pays For The Credit Check: The Landlord Or Tenant?
The responsibility for covering the cost of a credit check in rental transactions varies on a case-by-case basis. Many independent landlords prefer tenants to pay for this transaction, as its costs can add up quickly if multiple tenants are interested in the same property.
If you’re transacting with a property manager, however, they’ll most likely cover the costs for the credit check, as they can screen rental applicants better by doing so.
Will I Pass a Credit Check for Renting?
There’s no one-size-fits-all rule stating whether or not you can pass a credit check for renting. However, as previously mentioned, the higher your credit score is, the more likely you’ll pass a credit check requested by a landlord or a property manager.
With that said, it’s best to aim for a credit score of 660 or more if you plan on renting a new place soon. Just remember, though, that building your credit score and history is a long-term commitment. So, don’t expect overnight results when you’re trying to improve your credit records.
How to Build Credit Using Rental Payments
Building your credit through rental payments is one way to achieve your financial goals sooner. Equifax, TransUnion and Experian all include rent payment details when they receive it and use it in calculating your credit score.
There are different ways to get your rent records reported to credit bureaus. One of them is through Chexy, a rent payments platform that lets tenants earn rewards and build credit on rent.
When you opt in to its Credit Builder program, Chexy will share your rent payment information and payments with Equifax every month. If your payments are on time, this will reflect positively on your credit history and show your financial responsibility and reliability.
Your payment history comprises over a third of your credit score, so reporting timely rent payments positively affects your credit score. This can significantly help you if you have a limited credit history or if you are on the path of rebuilding your credit.
As Chexy reports rent payments that you make on time, you can start to build, repair or improve your credit score. In return, you will get lower interest rates when you apply for a loan, mortgage or other credit product.
Using Chexy to pay your rent will enable you to capitalize on the benefits of your rent payments to strengthen your credit profile. It will also benefit your credit score by increasing your average credit account age over time.
FAQs
Rental credit checks are considered hard inquiries in Canada. So, they can negatively affect your credit score, especially if your credit is checked multiple times in a short period. It’s worth noting, though, that whenever rental credit checks negatively affect your credit score, the effect is often temporary.
Yes, rent can positively and negatively affect your credit score, but know that this won’t always be the case. Rental payments will only impact your credit score if your landlord decides to report that you’ve regularly paid or missed them to credit bureaus.
Rental payments can increase your credit score if your landlord reports them to credit bureaus. As mentioned earlier, though, landlords aren’t legally obliged to do this, so it’s best to bring this topic up before renting a property.
Evictions don’t directly affect your credit score in Canada, but they will be included in your credit history. However, in instances where you’re evicted due to unpaid fees that the landlord then reports to credit bureaus, your credit score will be affected.
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