What Do Landlords Look For in a Credit Score?

What Do Landlords Look For in a Credit Score?

Reading Time: 4 minutes

Whether you’re applying for a loan or an apartment, at some point, the state of your credit will likely matter. Before entering into a monetary arrangement with a customer, a lot of businesses and business owners will check your credit.

 

As important as your credit is, a lot of people know very little about credit and how it works. That’s why we’re going to break down a few of the most common questions regarding credit, credit scores, and why they’re checked.

What is a Credit Score?

Your credit score is an average score based on your credit history. This credit score is affected by several factors, the biggest of which is your payment history. Your payment history is basically a record of your payments that takes into account whether or not they were made on time.

What is a Credit Check?

Simply put, a credit check is a report to understand your financial behavior. It can show if you paid back your credit on time, how much credit you currently have and how well you are managing it.

 

A company doesn’t need your consent to do this, but they must have a legitimate reason for looking it up.

Who Can Check My Credit?

Anyone from banks, credit providers to landlords, and even employers can run a credit check. However, to do so they’ll need the right information. To check someone’s credit you’ll need their social security number, address, and employment information.

 

This is why landlords will often ask for this type of information on the rental application.

Why Do Landlords Run Credit Checks?

When it comes to renting to a potential tenant, landlords want to make sure the applicant is dependable. Late payments and broken leases can be a real inconvenience for landlords, so they typically avoid situations like as much as they can by choosing less “risky” tenants.

 

To avoid entering into a contract with someone that regularly submits late payments, Landlords will often run a credit check. While your credit is mostly determined by your payment habits, several other factors can affect your credit score.

What’s Included in a Credit Check?

A lot more than your credit history goes into a credit check. In addition to credit-related payments, a credit check will provide your potential landlord with a history of your finances, criminal convictions, and lawsuits.

 

Additionally:

 

A credit check will provide your potential landlord with information regarding your financial stability. They can check your employment status as well as your income during the screening process.

 

A credit check will also provide landlords with information regarding their applicant’s debt. However, debt doesn’t usually play as big a part in the landlord’s final decision. Typically, they’re more interested in your income and your credit.

What Do Landlords Look For in a Credit Check?

Different landlords have different standards when it comes to who they’ll sign a lease with. In some cases, landlords won’t even run credit checks, although most choose to do so.

 

Landlords have the right to refuse an application due to criminal convictions. However, according to the law, they aren’t supposed to let an arrest affect their decision unless that arrest was followed by a conviction.

 

When it comes to a credit check, the two biggest factors for a landlord are your income and your credit history. Landlords typically want to make sure you make enough money to pay them.

 

Furthermore, they want to make sure you have a habit of paying your bills on time.

 

Landlords and Credit Score

 

What Are Some Dealbreakers for Landlords?

Again, different landlords have different standards when it comes to what they would consider a dealbreaker.

 

Most landlords want to rent to tenants that have a credit score of 620 or higher. A credit score lower than 620 might be a dealbreaker for some landlords. Similarly, past evictions are another red flag that landlords will often take into consideration.

 

A credit check doesn’t provide your landlord with information regarding past evictions. However, they can find out about evictions through other means. While a single eviction might not be a dealbreaker for a landlord, it’s still a red flag that will likely affect their decision.

 

Another potential dealbreaker for landlords is the applicant’s income. Your potential landlord wants to make sure that your income is substantial enough to cover the cost of your rent.

How Do I Check My Credit Score?

Checking your credit is particularly easy. All you’ll need is your social security number, address, and employment information. However, you should be very careful when it comes to giving your social security number.

 

Be sure to only check your credit score with trusted platforms.

 

One of the most commonly used and trusted credit check sites is Experian. To check your credit, just click the link! It’ll redirect you to Experian’s online credit check.

A Good Credit Score is the Key to Financial Freedom

At the end of the day, having good credit mostly comes down to paying your bills and rent on time. There are a few other ways to increase your credit score. However, as long as you live within your means and spend responsibly, your credit score will usually be okay.

 

If you’re worried about what a potential landlord might find on your credit report, look first. You’re entitled to a free annual credit report. Plus, there are several ways to check your credit for free online.

 

You can’t control how a landlord or property manager might interpret your credit report, but if you know what’s on it, you’ll be more prepared to answer any questions they might have.

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Making Sense of Millennial Credit Card Delinquency

Making Sense of Millennial Credit Card Delinquency

Reading Time: 4 minutes

The New York Federal Reserve report recently shared a chart that does not bode well for young millennials. It showed a trend of 18-29 year-olds who are more than 90 days delinquent on credit card payments.

This can be concerning for a few reasons; one, because the millennial generation has been traditionally known up to this point as being debt-averse and critical of banks and creditors. The millennial generation grew up watching their parents struggle during the Great Recession that ravaged the US economy during the late 2000s.

Economists believe that this was the genesis for the millennial generations’ distrust in banks and reluctance to take on credit card debt. In fact, between 2008 and 2012, only 41% of adults in their twenties even had a credit card.

The point is that up until very recently millennials have been cautious with their money and typically responsible with credit card debt if they even had any. But that is not the only concerning factor to this growing trend.

Millennial Unemployment

Having credit card debt is one thing but not having any means to pay it back is a much more alarming notion, but that is the reality that many millennials are facing. Just a few years ago, the millennial unemployment rate was at a staggering 12.8%. It is even grimmer when you compare that number to the 4.9% of other eligible age groups that were unemployed at the same time.

The US economy has put the Great Recession behind it and has been experiencing growth for the last decade, so the jobs are out there. The problem is that millennials tend to have higher expectations when it comes to getting a job.

Millennials often get looked at as a remarkably entitled generation of people, and this reflects in the way they select jobs. Many job offers are turned down by members of this generation because they were expecting a higher pay rate even in comparison to their lack of experience.

Education may have something to do with the millennial unemployment rate as well. Many companies are reporting that the upcoming workforce is lacking in real-world skills like critical thinking and basic communication. Millennials are also more likely to have gravitated towards theoretical studies in their college educations, which doesn’t help the situation much.

This lull in employment could not have come at a worse time for millennials either. It is generally agreed by people of the previous generation that it is much harder to get started in life financially these days than it was for their age. Part of this has to do with the increasing cost of higher education, so student loan debts are higher than ever.

This creates a vicious cycle for millennials in terms of job prospects. For example, a fresh-faced college graduate may open a line of credit to help furnish a new apartment with the hopes of landing a job soon. Maybe he also has a significant amount of student loan debt. Things are shaky as he or she is first entering the job market, and a combination of high expectations, mounting debt and lack of real-world skills are making it difficult to land a job.

So their credit scores are taking a nosedive and guess what: some companies will actually look at a candidate’s credit score and factor that into their decision to hire or not.

What is Contributing to Millennial Credit Delinquency?

Seeing a generation traditionally wary of credit card debt and realizing that it is harder for them to get a job are both bad omens but there what is causing the actual rise in delinquency among millennials?

One of the most immediate contributors to the increasing amount of millennial credit card debt is raising rates. In 2018 interest rates were at a staggeringly low level but they are beginning to rise again, meaning that even people with good credit are facing interest rates of 18-25%.

Student loans are another factor in this trend. The prior generation had the benefit of much more lenient crediting when it came to student loans with significant banks offering specialized student credit cards. These student credit cards were relatively easy to come by, but the Credit Card Accountability Responsibility and Disclosure Act (also known as the CARD Act) of 2009 changes all that.

Now students have to show proof that they will be able to pay back student loans or at least evidence that their parents would help them. This has resulted in millennial students taking high-interest loans for their education, which can be challenging to claw one’s way out of.

Keeping Perspective

This all sounds like a financial emergency, but it is crucial to keep things in perspective. Even with a rise in millennial credit card delinquency the debt-to-income ratio as reported by the Federal Reserve is the lowest it’s been since 1980. Delinquency rates have also been at a record low in the past year, so we are nowhere near a financial crisis even with this uptick in millennial payment delinquency.

Many millennials are just starting to build their credit and hit the job market, so this is not necessarily a trend that will continue. While all young adults should be careful and responsible with credit card debt, the recent Fed report should be more of a precautionary tale than the harbinger of an all-out crisis.