Rental Credit Check in Canada: An All-Around Guide

Landlords require a credit check to see if you’re a good fit for their rental. But is this legal? Can you be denied housing due to a subpar credit score?

Get ready to discover the answers to all your questions about a rental credit check in Canada, how it works, what landlords look for, and how you can increase your score ahead of time and ascertain a successful agreement. 

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Can Landlords Perform Credit Checks?

Yes!

Asking for a credit score for a tenant is one way for the landlord to understand whether you’re conscientious and financially able to bear the responsibilities of renting and paying your rent on time. 

So, your landlord will do a renter credit check to determine your creditworthiness. Namely, the higher your credit score, the more likely you are to pay on time every month because you have a good track record. 

On the other hand, if your credit score is on the lower end of the scale, the landlord might be less inclined to have you as a tenant because you haven’t shown a strong enough conviction thus far. 

If you haven’t got the gist of it yet, it’s perfectly legal for a landlord to require a credit check for tenants in Canada. In fact, it’s even common practice. It helps the landlord find suitable renters and avoid expensive legal and eviction processes later on.

Landlords may ask to access your credit report themselves by being a member of a credit bureau, but they might also decide to use a third party. But if you want to prevent the negative impact that comes from a credit check, you can offer your own report from Equifax or TransUnion. 

Keep in mind that rental agencies also perform credit checks when looking for tenants to approve for rental property vacancies, but they typically use a third-party service to run them. 

And as a rule of thumb, the minimum credit score for renting an apartment in Canada is over 600, although it mostly depends on the lender. But with a score of 660 or higher, you should be able to rent your desired apartment without much issue. 

What Do Landlords Look For During a Credit Check?

Now, let’s talk about what’s important to your lender in a tenant credit check. Interestingly enough, they don’t just look at your score!

Here’s what lenders consider:

Credit History

Most landlords are concerned with a potential tenant’s credit history because they’re looking to find an indication of how well you handle your finances. Since your credit history is a detailed record of your ability to repay your debts, the landlord will want to know whether you pay your bills, how many credit cards you have and use, and how much debt you carry. 

Credit Score

Next, the landlord’s eye will probably shift to that consequential number – the credit score. Your score can tell prospective landlords a lot about you, including how risky it would be for them to rent their property to you. Essentially, this is how trustworthy you come across to the lender – the higher your score, the more financially responsible you are. 

A good credit score for renting is above 660, which is also a generally good score overall. Even though you might be able to secure a rental with a lower score, it’s always better to have more to offer, and there are ways to improve it. 

Debt

Unsurprisingly, how much debt you’re burdened with can make or break your renting opportunity. Even if you have a good enough credit score and all other things in order, when your landlord notices $50,000 in credit card debt, it will likely make them think twice about taking you on as a tenant. 

Eye-catching amounts of consumer debt can spoil an otherwise good credit report because now the landlord might think you won’t have enough money to prioritise the rent.

Derogatory Marks

Many landlords might also consider the presence of derogatory marks on a credit report for a rental. As these marks generally mean you didn’t pay back a loan as agreed, made late payments, or went bankrupt, potential lenders might think twice before having you sign a lease. 

Additionally, if the landlord sees a lower credit score and a derogatory mark, your chances of getting the rental will dive headfirst. 

How to Improve Your Credit Score Before a Credit Check?

If you’re looking for a rental, you should be prepared for a credit check. After all, why not give yourself the best fighting chance beforehand?

Check your score on one of the many apps, like the RBC one, and improve it before a landlord does a tenant credit check on you. Here are some things you can do:

Check for Mistakes

Before you hand out your rental application, check to see if your credit score is accurate. To do this, review the different sections of the report and verify the information. Occasionally, you might find an outstanding credit account that doesn’t belong to you or you have closed. In this case, notify the credit bureau of the error or file a dispute. 

But be prepared to discover that you may have wrongly considered something an error when it wasn’t. Regardless, talk to the bureau, verify the information, and correct it if necessary. 

Lower Credit Utilisation

Your credit utilisation rate is one of the main drivers of your credit score. So, the lower the percentage of credit utilised, the better your credit score overall. 

To reduce this percentage, you can either pay down what you owe on all your credit cards and lines of credit by making sure you start with the ones carrying the highest interest first. Alternatively, you can increase the amount of credit you have available by asking your bank to increase your credit card limit or line of credit.

Pay Debts on Time

Since a rental credit check in Canada is mostly done for the purpose of assessing the potential tenant’s ability to pay rent and bills on time, missed or late payments can significantly hurt your score and make you look bad in front of lenders. 

So if you have any outstanding payments like loans, utilities, or phone bills, pay them as soon as possible and eliminate them from your report. Then, ensure you’re paying your debts in full to avoid high interest rates that can further damage your numbers.  

Avoid Hard Credit Checks

Hard credit checks are always bad for your credit score, but they can be detrimental right before your rental application. If you need to apply for other types of loans, such as a car loan or a new credit card, the hard inquiry can damage your chances of landing your dream apartment.

For that reason, you should hold off on other loan applications until after you’ve secured your rental.   

Get a Secured Credit Card

If you don’t have the minimum credit score for renting an apartment in Canada, you can get a secured credit card that allows you to place a deposit with the provider, i.e. a percentage of the total limit on the card. 

If you can’t make timely payments, the money you pay upfront will go towards recouping some of the credit lent to you. But if you do pay on time, it can help you rebuild your credit score.

Luckily for you, we’ve already done our homework on the best secured credit cards in Canada, so head over there for our favourite picks!

Conclusion 

A rental credit check in Canada can cause a flurry of anxiety, but if you understand the factors, work with your credit score and not against it, and take steps to improve your credit report, you won’t have to worry about a thing. 

Your dream rental is only a credit check away, so good luck!