Rental Credit Checks in Canada: What You Need to Know

If you’re apartment hunting, potential landlords will run a rental credit check on you to ensure that you will make your rent payments on time. As a tenant, you may have some questions about what’s on your credit report and how to optimize your credit score to stand out in a competitive rental market. This article addresses those questions and more to help you rise to the top of the applicant pile the next time you apply for an apartment or house to rent. Here’s everything you need to know about a rental credit check in Canada.

What is a rental credit check?

A rental credit check is what happens when a landlord checks a potential tenant’s credit history to assess their financial stability and reliability. This information is pulled from the credit bureaus in Canada, such as Equifax or TransUnion. The credit bureaus collect and maintain credit information on consumers.

Your credit report contains information about your borrowing history, including credit cards, loans, mortgages, and other debts. It records how often you make payments, whether you pay on time or not, and if you have defaulted on any debts. If you have ever had a bill or other type of debt go to collections, or been sued for money owing, those things will show up on your credit report as a ‘Public Record.’

What is a credit score?

The information in your credit report determines your credit score. A credit score is a number between 300 and 900 that represents your creditworthiness as a single number. The higher your credit score, the more creditworthy you are deemed to be. A score above 700 is generally considered to be good, while a score below 600 means that you may be considered a less attractive borrower to a lender, or a less attractive tenant to a landlord.

How your credit score is calculated

Various credit reporting agencies, known as credit bureaus, have different methods to calculate your credit score. In general, the main factors that go into the calculation are:

• Your payment history
• Your used credit vs. the total credit you have available on credit cards and lines of credit
• The length of your credit history
• Number of inquiries, how many times you have applied for credit
• Public records, such as bankruptcies, accounts in collections, and court judgements

Your rental credit check: what landlords can see

When you request your own credit report or when a lending institution or landlord requests one on you, there are a few items that everyone can see and evaluate. These include, but are not limited to:

• Your credit score
• Your history of on-time, late, and missed payments
• Current debts owing
• Any accounts that are in collections, bankruptcies, or consumer proposals.
• A vehicle repossession
• A credit counselling program

Why do landlords do rental credit checks?

The main reason landlords require a rental credit check is to evaluate a tenant’s financial responsibility and their likelihood to pay rent as agreed. A credit report provides an objective measure of your financial behaviour, which landlords can use to gauge potential risks.

Trusting someone with a major asset like a house or apartment is risky business for landlords. The consequences of having a tenant who regularly pays late or defaults altogether can be financially significant – even devastating. A rental credit check is the first line of defence landlords have when it comes to protecting their own financial well-being.

Aren’t rental credit checks unfair to tenants?

No, not necessarily – even though it can feel like it at times. Rental credit checks are also essential for tenants, even those with excellent credit scores. It creates a system that relies on objective financial information rather than personal impressions which can help prevent discrimination or bias in the tenant selection process.

Having said that, rental credit checks can certainly feel discriminatory if you have a bad credit score for reasons outside your control. Life circumstances like a medical emergency, divorce, or job loss can negatively impact your credit score and is not a true reflection of your moral character or current financial situation.

Both landlords and tenants need to remember that a good credit score doesn’t necessarily mean a tenant will be ideal in other respects, and a poor score doesn’t automatically mean they’ll be a problem tenant. While a rental credit check can provide significant insights into a tenant’s financial responsibility, it’s only one piece of the puzzle.

Can I refuse a rental credit check?

The short answer is yes. But the long answer is no. Legally, Landlords must get your expressed consent to run a rental credit check on you as per the rules set by the Office of the Privacy Commissioner of Canada. They must also do the following:

• Tell you why they’re collecting your personal information before they start or while they’re doing it. These reasons need to make sense to most people in that situation.
• Give you access to the personal information they have about you and let you check if it’s correct
• Only use your personal information for the reason they collected it in the first place
• Keep your personal information safe and protected

While you have the right to refuse a rental credit check, the landlord also has the right to disqualify your application if you do. If you are serious about a particular apartment or house to rent, then it is in your best interest to consent to a rental credit check.

What are landlords looking for on a rental credit check?

A landlord is primarily looking for patterns of responsible financial behaviour. Specifically, they might look at:

1. Credit score

Some landlords might have a minimum required credit score they use to filter tenant applications. Obviously, a higher score indicates a history of good financial behaviour. While each landlord may have different requirements, scores above 600 are generally considered acceptable.

2. Payment history

Your payment history is an important factor. Your landlord will likely focus on this to determine whether you have generally paid your obligations on time. Regular, on-time payments suggest financial stability and reliability. This helps landlords assess the likelihood that you will make your rental payments as agreed.

3. Debt load

Similarly, an overview of your current outstanding debts helps the landlord determine what other financial obligations you have, besides the rent you will pay each month. They’ll compare your monthly debt payments to your total monthly income to determine if you can afford the rent. High levels of debt indicate potential difficulty in affording rent, which makes you a higher-risk tenant.

4. Bankruptcies, collections, and other public records

The last aspect that landlords will likely consider is whether you have ever declared bankruptcy or have had any of your accounts sent to collections. Landlords want stable and trustworthy tenants, so a bankruptcy or consumer proposal would likely hurt your chances of being approved for a rental property. These serious financial issues could raise red flags about a tenant’s ability or willingness to meet rent obligations.

What else does a rental credit check tell landlords about me?

You may be surprised to know that a savvy landlord can tell if you’ve been taken to court for things like wage garnishment, unpaid child support, unpaid alimony, and other debts you owe. A history of late and missed payments coupled with unpaid collection items are major red flags.

Creditors can sue you for repayment. If that happens, a court judgment with a case number could show up as a Public Record on your credit report. The same goes for other situations where you fail to pay money that is legally owed to someone.

The landlord could take the case number that appears on your credit report, and search for it on the Court of the Queen’s Bench website for your province. From there, they can find more details about the court case like who sued you, how much was owed, and the outcome of the case. They can see if you were ordered to repay the debt, if the order was satisfied, or if the court ruled to garnish your wages.

Why is that important? It tells potential landlords a lot about your character. It’s one thing to miss a payment here or there or have a bill go to collections, we all make mistakes. But situations in which someone had to pursue you legally can indicate to landlords that you have little regard for your financial obligations and you will be difficult and expensive to collect from.

Why is a rental credit check important and will I be subject to one?

A credit check is used by landlords to assess your financial history to know how likely you are to pay rent on time and in full each month. This helps them gain peace of mind and avoid expensive legal action and eviction processes later on.

Due to these benefits, most landlords will require you to either provide a credit report or disclose key personal details, such as your date of birth or social insurance number (SIN), at the time of the application so they can pull your credit report themselves.

A note about your social insurance number (SIN) for a rental credit check

Having said that, you are not legally required to give a landlord your SIN just because they asked for it. Your SIN is a private and confidential identifier that the Canada Revenue Agency uses to collect income-related information about you.

You cannot be denied a service or product, like a place to live, because you choose not to share your SIN unless it is legally required or when no other form of identification would be enough to complete the transaction. In the case of a rental credit check, a landlord only needs your:

1. Name

2. Current address

3. Date of birth

Are rental credit checks legal in Canada?

Oh yes! Rental credit checks are legal and common practice. You should expect landlords to require this information as part of the application process. If you are asked to provide your own credit report, you have a few options.

In Canada, the two main credit bureaus are Equifax and TransUnion. To access your credit report from these agencies, you need to go to their respective websites and provide the information required.

Alternatively, the landlord may decide to use a third party to access a tenant’s credit report. While some landlords may opt to access your report themselves, it could still be worth offering your own credit report to help save time and prevent your own score from being negatively impacted due to the Inquiry, more commonly known as a hard credit check.

How can I improve my credit score before a rental credit check?

If you requested your credit report and see a score below a landlord’s requirement or below what you would like, there are a few actions you can take to bolster your score relatively quickly.

1. Check for errors

The first thing to do is to assess whether your score is accurate. The way to do this is by reviewing the different sections of your credit report and verifying the information. If you see a credit account that doesn’t belong to you, an account that was closed previously and is showing as outstanding, or any other mistakes, flag the error immediately to the credit bureau.

You can file a dispute with Equifax and with TransUnion, depending on which reporting agency shows the error on your file. The bureau will then work with you to understand the error, verify it with the relevant creditor, and correct it as needed. You can check your credit score for free anytime you want without hurting it through companies like Borrowell, ClearScore, Credit Karma, and more.

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2. Reduce your credit utilization

One of the main drivers of your credit score is your rate of credit utilization. The lower the percentage of credit used compared to the total credit available to you, the better your credit score. There are two ways to reduce this percentage.

You can either pay down what you owe on your credit cards and lines of credit (LOCs), starting with the highest-interest ones first, or you can increase the amount of credit available to you on those accounts. The simplest way to increase your available credit is to ask if qualify for an increase in your credit card limit or line of credit. But this only works as long as you do not borrow more and increase what you owe on those things.

Read More: How to Pay Off Debt with the Snowball Method or the Avalanche Method

3. Pay your bills on time

Missed or late payments hurt your credit score when the lender or creditor reports them to the bureaus. If you have outstanding payments that need to be made – whether they are on a loan, phone bill, utility bill, etc. – you should prioritize making them. The later you pay the outstanding bills, the more your credit score will suffer. You should also aim to pay your debts in full to avoid potentially expensive interest rates and to demonstrate strong repayment capabilities.

4. Avoid hard inquiries on your profile in the months before your application

Inquires are hard credit checks done by a third party accessing your credit file because you applied for credit. A hard credit check differs from a soft credit check in that it adversely impacts your credit score. If you are on the market for another type of loan, such as a car loan or new credit card, at the same time as your rental application, it might be wise to apply for those things at a later date after the rental application has been approved. 

Bonus: Get a secured credit card

If you have a credit score below 600, it can be more challenging to get your rental application approved. One way to improve your chances is with the help of a secured credit card. With a secured credit card, you have to place a deposit with the credit card provider that will likely be a percentage of the total credit limit on the card.

In the event that you are unable to make payments on time, the cash you pay upfront will be used to recoup some of the credit that the provider lent you. However, if you make payments on time and in full, this is a great way to rebuild your credit score over time.

What to do if you have a bad credit score but need a place to live right now

If you need to move but don’t have time to increase your score before a rental credit check, don’t despair. The following strategies can help improve your chances of securing a rental.

Provide explanation: If your low credit score is because life threw you a curveball, such as a medical emergency or job loss, providing an explanation to potential landlords may help.

Offer a higher damage deposit: If permitted by provincial laws, offering a higher security deposit can help offset the landlord’s financial risk.

Find a co-signer or guarantor: This person would be responsible for the rent if you can’t pay.

Show proof of income: Demonstrating a steady income, even with a lower credit score, can reassure landlords that you have the financial means to pay the rent. If you can show that you have stable and gainful employment (usually 2-3 times the rent) this can help alleviate their concerns.

Provide references: Personal or professional references who can vouch for your character, responsibility, and reliability may persuade the landlord to look past a bad credit score.

FAQs about rental credit checks