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.
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.
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.