Are you looking to lease a new apartment or home in Canada? If so, you’ll likely have to pass a rental credit check before your lease application is approved.
Landlords and property managers conduct rental credit checks (also known as tenant screening) to validate the creditworthiness of prospective tenants.
Your credit rating, combined with your trustworthiness as a tenant, can determine if your application is approved and how much of a security deposit you’ll need to put down on the unit.
Below, I’ll explain everything you need to know about rental credit checks in Canada and give you some helpful tips to improve your renter score and your chances of getting approved!
After speaking with a leasing agent at an apartment complex and touring the unit in question, you’ll usually be asked to complete a tenant application. This application will ask you a few basic questions about your employment and references and might ask for your consent to perform a rental credit check.
Depending on the property management company that you’re working with, a rental credit check could involve one (or both) of the following:
- Checking your consumer credit report
- Cross-referencing your name with renter score models
Consumer credit checks are the most common, as they’re a good indicator of your creditworthiness. If you have a good credit score and a history of paying all of your bills on time, then it’s safe to assume that you’ll be able to pay your rent on time.
These rental credit checks are typically administered by third-party credit reporting agencies and involve reviewing an individual’s credit report, which contains a detailed history of their credit-related activities.
In addition to checking your consumer credit report, property managers may also run your name through another third-party data aggregator to check your rental history.
Some property management companies work with companies that aggregate tenant data to determine overall tenant worthiness. This can include data such as:
- How often you’ve paid rent on time
- If and when you were late on rent
- How many other rentals you’ve applied to in recent months/years
- Violations of your lease agreement (and associated fines)
The information contained within a tenant report is often far more detailed than the information contained within your credit report. It is often used in correlation with your credit report to determine your overall eligibility as a tenant.
Related Reading: Ways to get a free credit score report in Canada.
Rental credit checks are performed to ensure that you’re a good fit for the unit and the community. Most property managers and leasing agents don’t want to deal with an individual with a history of missing rent payments or skipping out on their bills.
The one exception to this rule was during the pandemic when the government supported affected renters by putting a temporary hold on evictions.
Overall, the objective of a rental credit check is to ensure that the applicant has a good history of paying bills and being responsible with their finances.
As long as you’ve done a good job adhering to a budget, haven’t missed any major payments, and are caught up on your bills, then you shouldn’t have to worry.
Rental credit checks can help leasing agents determine if you’re a good fit for their community. Credit reports include some personal information, such as:
- Court records
- Traffic violations
- Bankruptcy claims
A speeding ticket likely won’t affect your eligibility for a rental unit, but more serious crimes and charges could indicate a red flag to property managers.
Rental credit checks and credit scores are closely related as they’re both used to assess an individual’s overall creditworthiness.
Credit scores are calculated based on an individual’s consumer credit history, which includes their payment history, outstanding debts, credit utilization, length of credit history, and recent credit inquiries.
Rental credit checks, on the other hand, focus on the applicant’s rental history and their ability to pay rent on time.
So, while rental credit checks and credit scores are not the same, they are closely related, and both play a role in assessing an individual’s creditworthiness. A good credit score can also make it easier to pass a rental credit check, as it indicates to landlords that an individual is financially responsible.
A rental credit check and the resulting report can have a significant impact on an individual’s lease terms when applying for an apartment. Some of the ways that a rental credit check can affect lease terms include:
- The amount of your security deposit: If a rental credit check reveals a poor credit history, a landlord may require a higher security deposit to protect them against potential damages or missed rent payments. Sometimes, a landlord may even require multiple months’ rent as a security deposit.
- Length of your lease term: Landlords may choose to offer a shorter lease term to a tenant with a poor credit history, such as a six-month lease instead of a one-year lease. This allows the landlord to assess the tenant’s ability to pay rent on time before committing to a longer lease term.
- Whether or not you need a co-signer: If an applicant has a poor credit history, a landlord may require a co-signer on the lease agreement to guarantee rent payments. This individual agrees to take financial responsibility for rent payments if the tenant defaults.
- High-risk rent: Sometimes, a leasing agent may elect to increase the rent for a tenant with a poor credit history. This is because the landlord may view the tenant as a higher risk.
Regarding your rental report, landlords want to see that an applicant will be a good fit for their unit and the neighbourhood as a whole. With that in mind, here are some tips to make you look like a grade-A tenant.
This probably goes without saying, but you should always try to pay your rent on time. Failure to do so is one of the worst things you can do for your rental score.
Even though some rental properties offer a 5-day grace period, you should always do your best to pay on the due date. This will help you if you need a letter from your landlord regarding your payment history on the account.
Violating your lease term is a surefire way to ensure your application is red-flagged. Even if you pay your rent on time, a lease violation on your rental report can mark you as a high-risk tenant or could even get you de-listed.
Some of the most common lease violations include:
- Allowing an unregistered resident to stay in your unit for more than a week
- Bringing pets into a unit that’s not pet-friendly
- Having unregistered pets in a unit
- Noise violations
- Failure to keep your unit and the common grounds clean
- Failure to report significant damages or maintenance concerns
- Smoking or vaping within a unit
- Possession of illegal or restricted items within a unit
When moving day comes around, make sure that you leave your rental unit in good condition. Vacuum up the dirt, mop the floors, clean the appliances, clean the bathrooms, wipe the baseboards, and fill in any nail holes in the wall.
This will ensure that you get your security deposit back and allows you to use your previous landlord as a good reference.
Some properties require that tenants earn triple the amount of rent. This is a common practice in the rental industry and is a general guideline for determining whether a tenant has enough income to cover their living expenses.
It helps to ensure that tenants can comfortably afford their monthly rent payments and reduces the risk of missed rent payments or eviction.
If you don’t personally earn triple the cost of rent, most landlords will suggest that you add a roommate or a co-signer to the lease agreement.
Last but not least, a little bit of friendliness goes a long way. Always try to be friendly to your landlord and treat the staff respectfully.
If an unexpected emergency arises and you can’t pay rent on time, reach out to them and explain the situation. There’s a good chance that they’ll cut you some slack and not report your late payment.
Lastly, here are a few helpful tips to improve your credit score, which is another important part of a rental credit check.
If you have unpaid utility bills, car notes, or loans that aren’t current, make sure you pay them down as much as possible. This will improve your payment history, which is an important part of your credit score.
Paying down your credit cards will reduce your credit utilization, showing that you’re a more financially responsible applicant.
Your credit report may not always be correct. Sometimes, your creditors fail to report recent payments or accounts paid in full to Equifax and TransUnion (Canada’s two consumer credit bureaus).
Once you get your free credit report, browse through it to ensure that everything is correct and accurate. If you find discrepancies, contact the creditor and ask them to notify the credit bureau. This can help to improve your credit score.
These days, rental credit checks are the norm. Very few landlords will even consider applicants who are unwilling to submit to a rental credit check.
As long as you’re a good tenant, have a history of paying your rent on time, and have kept up with all of your recent credit payments, then you shouldn’t have a problem getting approved, though.
If you plan on moving soon, then I suggest working on your credit ahead of time, as it can often take several months to begin seeing improvements to your score.
Keep reading to see my tips to improve your credit score by 100 points!