Most landlords, agents, and property managers regard an applicant's credit score as a critical part of the tenant screening process. That's why you may be wondering how to get a credit score for a rental application. Unfortunately, most owners/agents don't fully understand credit scores and what they mean when vetting prospective tenants.
Credit scores can be used for a variety of purposes such as lending, insurance, and even mobile phones. But getting a credit score for renting is particularly important when you're trying to assess an applicant's ability to meet the financial requirements associated with renting.
In this article, we will go over the top facts you should know about credit scores. We'll even show you the easiest way to get a credit score for renting.
1. Credit Scores can Actually Range From as Low as 300 up to about 900
Although credit score can range slightly, most credit reporting sources have a range of about 300 to 900. Below you can find a credit score distribution according to FICO.
As you can see, 58% of Americans have a credit score of 700 or above, while 42% have scores below this amount. Where might your applicants fall in?
There are other types of credit scores aside from FICO scores that may be better to use for renting. One score, TransUnion's ResidentScore, is specifically tailored to predict rental outcomes. The ResidentScore uses roughly the same range as a FICO but uses a slightly different algorithm to provide a score that may be better for evaluating renters. A FICO score is used for a wide variety of purposes and so may not be the best credit score to get for a rental application.
Ether way you should know an applicant's score before you decide to rent out your house/apartment. Applicants can check their credit scores completely for free anytime on sites like Credit Karma. But it is always a good practice to access a credit score for renting on your own. Accepting any documentation directly from applicants leaves the door open for possible misrepresentation and tampering. Make sure you always get a credit score for a rental application from a trustworthy source.
2. Many Landlords Require 620 and Above
The average accepted credit score for a rental can vary greatly depending on the region, the property, and even your preferences. But a good starting point for many landlords seems to be at around a 620 or above to be at least eligible for consideration. But you may have different criteria and may want to see a higher score. As a general rule of thumb, a score at 650 or below will typically trigger a more in-depth look into an applicant's history.
The important thing to remember is that the credit score is just one aspect of an applicant's profile. Most agents/owners take multiple factors into account when vetting tenants.
3. Apartment Renters can Overcome a Low Credit Score with Other Factors
A credit score for renting is a big criteria you might weigh when you see a rental application. So what can you do if your applicant's score is on the lower side?
Make sure he or she meets or exceeds your other criteria.
These items may include
- Being able to show multiple years of unbroken rental history with positive recommendations from your previous landlords
- Being free from any evictions on your record
- Having a monthly income that exceeds three times the monthly rent amount. For example, if the monthly rent is $2,000, make sure your applicant's total gross household income is $6,000 (or more!)
For applicants with a lower score, you may want to request extra security deposit or require a co-signer with a good credit score who can vouch for them.
4. Late or Missing Payments Aren’t the Only things that can Damage an Applicant's Credit Score
Making on-time payments for a credit card is not necessarily enough to ensure a high score. There are many other common mistakes people make that hurt their scores. It's important that you know the factors impacting an applicant's credit score for renting.
- A big mistake people make is having a high balance in relation to their credit limit. If their limit is $5,000 and they constantly are spending up to $4,800 each month this can have an adverse effect on their credit score.
- Another common mistake is maxing out cards. Credit bureaus don’t look favorably on this because it means the applicant is spending a lot in relation to his or her income.
- Having too many credit cards also can come back to bite. From a landlord's perspective, the more credit cards the applicant has, the higher amount of debt the applicant get get into.
- Finally, too many hard credit inquiries can damage an applicant's score. Credit inquiries commonly occur when an applicant submits a credit application. Too many inquiries are an indication that the applicant is unable to move forward on his or her first option and that he or she will likely take on more debt in the future.
Applicants who show that they can continue to consistently pay off their current credit balances and loans will have a higher credit score.
5. You can Run an Applicant's Credit Score for Renting without Damaging his or her Score
Many prospective tenants are hesitant about applying to a rental property and allowing you to get their credit score for a rental application. This is because most credit pulls damage an applicant's score by up to 5 points and leave an inquiry on his or her credit report.
However, there are ways for you to get applicants' credit scores for renting without damaging their scores or leaving any inquiries on their reports. Better yet, you'll still be able to get a full credit report and bonafide ResidentScore from TransUnion.
6. Each Applicant Has a Different Credit Score, Even Married Couples
This may seem like an obvious one, but many agents/owners are not aware that everyone has a distinct credit score, even a husband and a wife. That means you need to get a separate credit score for all applicants even if they're married. Not to mention the fact that evaluating applicants differently based on their marital status can be a form of discrimination, you don't want to overlook any applicants with a poor credit score.
For example, there could be a couple who has all of their home loans, car loans, and credit card debt in the husband's name. The husband will likely have a poor score while the wife will have a good score. In this case, you'd be missing a ton of information if you never saw the husband's credit score.
7. Applicants Don’t Have Just One Credit Score
An applicant's credit score is not a single number. Depending on where you get the score from, an applicant could have as many as three different scores representing his or her credit. This occurs because all of an applicant's financial activity is not always reported to all three credit bureaus. Also, the timing that this information is reported to each bureau may vary. For this reason, an applicant's score can be different depending on where you got it from. But rest assured all the sources will have moderately similar scores for you.
A great credit score for renting is called a ResidentScore and it comes from TransUnion. The ResidentScore is one of the only credit scores that is designed exclusively for the rental process and not used for other purposes such as lending, etc.
8. A Credit Score is Made Up of Three Categories
Generally speaking, there are three categories that go into a credit score:
The first is account info such as credit and loans. Second are public records like liens and bankruptcies, and finally there are credit inquiries that have been made. It’s important to realize that personal information such as address, age, gender, race, etc. does not impact the score.
9. Applicants Who Make Regular Rent Payments May have a Better Credit Score
The action of just making monthly rent payment on time can build an applicant's credit score. This helps build a track record and shows that the applicant is responsible enough to consistently pay rent. The only caveat is that the previous landlords would need to report the rental history data to the credit bureaus. If you're not doing this currently, services such as RentTrack can make this process easy.
10. A Credit Score is Recalculated each Time it’s Pulled
Most people make the mistake of thinking that an applicant's credit score already exists and that each inquiry allows you to see that number. But actually, the number is re-calculated freshly each time an inquiry is run. This means that the number can change each time the credit is run depending on the information available at the time.
How to Get a Credit Score for a Rental Application
Now that you're well-apprised of credit scores and how they work, you might have the need to get a credit score for a rental application when you're screening tenants. Using RentSpree, you can access a full credit score and report for each applicant. Best of all, the screening fee can be paid directly by the applicant when the reports are submitted. That means there is no cost for you!
RentSpree's credit report comes with the best credit score for renting, a TransUnion ResidentScore. That way, you'll be sure you're using industry-leading data for your decision. You'll never wonder how to get a credit score for a rental application again!