The Credit Check - What you need to know
If you’re going to be renting a place, your potential landlord will definitely be checking your credit history. As such, the following are some key pointers and recommendations as to what a credit score is and how to minimize any issues that may arise.
What is a credit history?
Each individual has a credit history. As the name suggests, you build a credit history when you borrow money and pay it back – this can be in different forms of credit including a credit card, a student loan, and even if you pay your bills. The credit history for each individual is called a credit file which is a report about how you use credit and when you make payments as well as current and past information regarding where you live and work. This information is maintained by credit bureaus (i.e. Equifax Canada).
What is a credit rating?
Essentially, your credit rating, or credit score (one in the same) is the result of your credit history, It is a numerical score that creditors use to assess your credit worthiness. It is calculated each time someone - a lender or a potential landlord - requests it.
Who has access to my credit history?
Other than the three credit bureaus who maintain your credit information, you are the only individual who has direct access to your credit history. Credit bureaus cannot release your information without your written consent.
Why do landlords want to see my credit history?
With your written consent, a landlord can access your credit history. This information helps them make a decision as to whether you’re a good “credit risk” – basically answering their key questions – can you afford the rent and will you pay on time?
Do I have to give a potential landlord access to my credit history?
Yes. Many landlords will not rent a unit to an individual without reviewing their credit history.
Top 3 actions you need to take to ensure you “pass” the credit check by a landlord
1. Expect that the landlord will perform a credit check on you.
2. Check your credit rating first. It’s not expensive – somewhere between $15 and $25. This way, you’ll know ahead of time if you’re going to run into any issues and questions regarding your credit history so you can be prepared. The two issues many individuals run into include a) you don’t have a credit rating (if you’re new to the country or never had a loan) or b) you have a poor credit rating. As well, it's also good to check your credit rating to ensure that there are no errors prior to a landlords reviewing your credit report. Note that many times there are in fact errors.
3. If you are a first-time renter, have had credit problems or do not have a credit rating, you may need a guarantor's letter from a parent or close friend stating that the guarantor will assume the risk if the you fail to pay the rent.
How do I get a good credit rating?
It’s actually quite simply – be responsible. Ensure that you make loan and bill payments and minimum credit card payments on time. The more timely payments you make over time, the better your credit score. However, the opposite can also apply. If you consistently miss payments or make late payments, your credit score will go down.
OK – I have a poor credit rating – what do I do?
Simply said, you need to improve your credit rating. While information typically sits on your file for five or six years, your best first step is to display a positive trend in bill and loan payments. If you can show that over a reasonable period of time (i.e. 6 months, 1 year, etc.) that you’ve changed your ways, landlords may (no guarantees) give you some leeway.
In regards to renting, you have two choices. A bad credit score will give you few if any rental options. So, either live at home or with a friend while you'r ebuilding up your credit score, or get someone (a parent, relative, close friend) to write a guarantor’s letter to assume the risk of you failing to pay rent.
List of Credit Bureaus in Canada
As previously mentioned, there are three credit bureaus in Canada: Equifax Canada, Trans Union Canada and Northern Credit Bureaus.
More information
The aforementioned is the quick “what you need to know” about credit checks. However, we recommend that you read The Canadian Mortgage and Housing Corporation’s (CMHC) pointers regarding credit checks if you require more information.
What is a credit history?
Each individual has a credit history. As the name suggests, you build a credit history when you borrow money and pay it back – this can be in different forms of credit including a credit card, a student loan, and even if you pay your bills. The credit history for each individual is called a credit file which is a report about how you use credit and when you make payments as well as current and past information regarding where you live and work. This information is maintained by credit bureaus (i.e. Equifax Canada).
What is a credit rating?
Essentially, your credit rating, or credit score (one in the same) is the result of your credit history, It is a numerical score that creditors use to assess your credit worthiness. It is calculated each time someone - a lender or a potential landlord - requests it.
Who has access to my credit history?
Other than the three credit bureaus who maintain your credit information, you are the only individual who has direct access to your credit history. Credit bureaus cannot release your information without your written consent.
Why do landlords want to see my credit history?
With your written consent, a landlord can access your credit history. This information helps them make a decision as to whether you’re a good “credit risk” – basically answering their key questions – can you afford the rent and will you pay on time?
Do I have to give a potential landlord access to my credit history?
Yes. Many landlords will not rent a unit to an individual without reviewing their credit history.
Top 3 actions you need to take to ensure you “pass” the credit check by a landlord
1. Expect that the landlord will perform a credit check on you.
2. Check your credit rating first. It’s not expensive – somewhere between $15 and $25. This way, you’ll know ahead of time if you’re going to run into any issues and questions regarding your credit history so you can be prepared. The two issues many individuals run into include a) you don’t have a credit rating (if you’re new to the country or never had a loan) or b) you have a poor credit rating. As well, it's also good to check your credit rating to ensure that there are no errors prior to a landlords reviewing your credit report. Note that many times there are in fact errors.
3. If you are a first-time renter, have had credit problems or do not have a credit rating, you may need a guarantor's letter from a parent or close friend stating that the guarantor will assume the risk if the you fail to pay the rent.
How do I get a good credit rating?
It’s actually quite simply – be responsible. Ensure that you make loan and bill payments and minimum credit card payments on time. The more timely payments you make over time, the better your credit score. However, the opposite can also apply. If you consistently miss payments or make late payments, your credit score will go down.
OK – I have a poor credit rating – what do I do?
Simply said, you need to improve your credit rating. While information typically sits on your file for five or six years, your best first step is to display a positive trend in bill and loan payments. If you can show that over a reasonable period of time (i.e. 6 months, 1 year, etc.) that you’ve changed your ways, landlords may (no guarantees) give you some leeway.
In regards to renting, you have two choices. A bad credit score will give you few if any rental options. So, either live at home or with a friend while you'r ebuilding up your credit score, or get someone (a parent, relative, close friend) to write a guarantor’s letter to assume the risk of you failing to pay rent.
List of Credit Bureaus in Canada
As previously mentioned, there are three credit bureaus in Canada: Equifax Canada, Trans Union Canada and Northern Credit Bureaus.
More information
The aforementioned is the quick “what you need to know” about credit checks. However, we recommend that you read The Canadian Mortgage and Housing Corporation’s (CMHC) pointers regarding credit checks if you require more information.