You probably already know how important your credit score is if you’re applying for a mortgage. Your credit score is a measure of your creditworthiness, and since a lender will be lending several hundreds of thousands of dollars to you, they want to be sure that you’re the kind of person that pays your debts.
A landlord has similar worries. A bad tenant can absolutely make a landlord’s life a nightmare, from trashing the place when they leave to squatting for months without paying rent and being unable to be evicted, there are serious troubles that could arise. Landlords are aware of this, and will try to check every possible facet of an applicant to make sure that they’re a good tenant.
One of the things a landlord will probably do is run a credit check on you. Since your credit score shows if you pay your bills on time, it’s a quick and easy way for a landlord to tell if you’re likely to pay rent on time as well. Also, people that have excellent credit and keep their finances in order are seen as less likely to cause trouble, which is another bonus for the landlord.
The Canadian Mortgage and Housing Corporation (CMHC) has a page dedicated to commonly asked questions about credit score and renting. Unsurprisingly, it’s mostly the same information that pertains to credit score and mortgage applications.
If you have good credit, you’ll probably have no trouble getting approved by a landlord. However, if you have bad credit, you may run into problems. Here’s what to do if you think your credit will affect your chances of getting a rental.
1. Check your credit report before you apply
If you don’t know what your credit is, you won’t be able to improve it effectively. Before applying for rentals, you should already have checked your credit and gotten a copy of your personal credit report to see if there’s anything that’s
a) detrimental, or
The two credit bureaus in Canada are Equifax and TransUnion. We’d all love if they were always right about everything, but sometimes you can have an error appear on your report. Someone may have even stolen your identity! If you don’t check your credit at least once a year, you’re at risk of someone ruining your credit without you knowing, so you might think everything is fine and get denied. If you see something is wrong, immediately contact the credit bureau that issued the report to get it rectified. An easy way to stay in the loop regarding your credit report is Credit+.
On the other hand, if everything is correct but damaging to your credit (such as missing payments a few years ago), you should also be aware of that. Depending on what the issue was, negative aspects of your credit drop off your report after a certain length of time. If you’re close to the drop-off point, it may be better to wait before applying so your credit goes back up.
2. If you’re denied based on your credit, get a copy of the report the landlord used
You’re entitled to see the report the landlord used that lead to them denying you. When you get it, compare that one with the one you already have (because you followed step 1) to see if there are any discrepancies. If there are, you may be able to dispute them with the landlord or the credit bureau.
3. Know your rights
Tenants have a lot of rights in Canada, and Ontario especially. There is a whole set of laws called the Ontario Residential Tenancies Act which gives the tenant a lot of protection. For example, although it might seem like a common practice because of American media, in Ontario it is illegal for a landlord to ask for a security (damage) deposit.
If you have bad credit, and the landlord agrees to rent to you if you pay a certain amount up front (such as six months’ or the full year’s rent), do not accept, as that it also illegal. The most they can ask for a deposit is one month’s rent (or one week’s if the rent is paid weekly), which will be applied to the last month’s (or week’s) rent payment. Even if you really want an apartment, and the landlord seems willing to work with you, tenant law is almost always in favour of the tenant – so long as you do nothing wrong.
If you want to improve your credit score, you’ll have to make all your payments on time and in full. The only thing that can restore a credit score is time. Quick-fix schemes like taking a loan to improve your credit score typically backfire. Be patient and responsible, and your score will improve eventually.