Credit checks: Everything you need to know

Are you the ideal tenant? Will you be able to pay your rent, and pay it on time? Before signing the lease, the landlord will probably want to know more about you, and a credit check is the best way to find out more than you have a nice smile and a firm handshake.

A credit check—the landlord’s assessment tool of choice—helps judge your financial health and measure your creditworthiness. It is a detailed report of the particulars on your current and past loans, your payment history and other pieces of personal information. In fact, the person requesting the assessment will also get your address and birthdate, and the names of all the organizations and individuals who have done a credit check on you in the past.

Your credit file is started the moment you borrow money from a bank. Then every time you use or make a payment on (or not!) a loan or credit card, the financial institutions provide the information on your activities to the assessment firms, which use the data to rate you. The 0–9 rating system assigns points every time you use your credit card. Take this message to heart: the better your payment habits, the better your credit rating!

Give credit to your application

Good credit can sway a landlord to choose you as a tenant. And a good reputation at several financial institutions will be especially valuable for future loan requests, making it easier to borrow money to buy furniture, appliances or a car. But bad credit will definitely decrease your chances of getting bank funding. Either the loan will be refused, or it will be approved at a very high interest rate.

Keep in mind that a virgin credit file is not as bad as a negative file. But if you haven’t ever used credit, your landlord won’t have much information about you. If you are accepted as a tenant, you may be asked to have a parent or friend co-sign, meaning that he or she would be responsible for paying the rent if you were not able.

Good credit is earned!

A credit rating is not written in stone. Below are some tips that will guarantee you a good reputation for years to come:

  • Make your payments on time. If money is tight one month, pay at least the minimum amount due.
  • Never borrow more than you really need, and make sure you can pay the interest, too.
  • If ever it’s truly impossible for you to pay your debt, tell your bank. They should be able to make a special agreement with you that will lessen the impact a missed payment would have on your credit.
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