Bad credit could stop you from moving on

by Jennifer Brown

If you’ve ever submitted an application for a new apartment and been rejected, you probably wondered why the landlord or property manager decided against you.

Chances are they ran a simple credit check and saw something they didn’t like. Increasingly there are online tenant screening services that provide real-time information to landlords on prospective tenants that are connected to the major credit bureaus.

If moving is on your mind and you haven’t checked your personal credit report in a while, you might want to do so well before looking at potential new apartments.

tenant verification

“It is important people understand the impact of credit reports and how to deal with the potential negative aspects of them,” says Jeffrey Schwartz, executive director of Consolidated Credit Counseling Services of Canada Inc. (CCSC), a not-for-profit organization that assists individuals with debt problems.

If you’ve never checked your credit report you maybe surprised at what you find. Often credit reports may still be flagging an old credit debt or issue you thought you dealt with years ago but it still hasn’t been removed from your record.

“More than anything else people should get a copy of their credit report to see if there are any errors or to see what is causing them difficulty if they get a negative response from someone who wants to extend credit, such as a landlord,” says Schwartz. “If you don’t pull the report you don’t know what’s on it.”

The next step is to determine what the problem is and whether it is justified.

“On the error side you may need to contact the creditor putting the note on your report. Sometimes people with similar names may have other people’s reports merged with theirs. Or, if you had a spouse and are divorced or separated, you may need to get them removed from your credit report,” says Schwartz.

If you have had recent credit problems but need to find a new place to live, before you go apartment hunting gather together as much supporting information as you can to try and convince landlords you are worthy of renting to.

“Come prepared. If you know there’s something on your credit report and you know it’s going to prompt some questions in the eyes of the landlord, sometimes your best offence is a good defence,” says Schwartz. “Knowing what might come up and being prepared shows the level of your character.”

If a landlord questions your debt or bad credit history, and doesn’t believe you will make your rental payments without issues, be prepared to explain when your credit problems happened and how you have dealt with them.

“Bring a pay statement or letter confirming your employment and annual salary. It shows landlords you’re taking it seriously,” says Schwartz.

You can also offer a guarantor such as a brother, sister, or parent, but as uncomfortable as the conversation might be, be sure to ask them if their credit history is clean.

“Also make sure the guarantor knows they could be on the hook for the term of the tenancy,” says Schwartz.

In addition to arming yourself with references from employers, also consider asking someone you’ve done business with, or a previous landlord, to write a letter for you indicating your payment history.

“That would go a long way in comparison to what may or may not be on your credit report,” he says.

Anyone can check their credit report and credit bureaus such as Equifax and TransUnion offer the report online for a fee.

Schwartz says it’s not easy to get credit report errors or old debt notations removed, but it’s worth putting in the effort to do so.

“You have to be diligent and dedicated and often merciless,” he says. “The credit bureaus accept information, they don’t put the notes on your account. It’s a creditor putting those notations on the report, so while you can report errors to the credit bureau you have to interface with the creditor to retract the information or correct it.”

It is also advised that anything you do to try and correct on your report should be done in writing.

Conversely, if you have never had a loan or a credit card, prospective landlords will have little information to review in your credit file. An empty file tells prospective landlords nothing about any possible financial risks.

If you are a first-time renter, you may need a guarantor’s letter from someone stating they will assume the risk if the you fail to pay the rent.

So how do you keep a good credit rating?

According to the Canada Mortgage and Housing Corp. be sure to make loan and bill payments and minimum credit card payments on time. Consistently missing payments, or making late payments, will lower your rating.

It may take months or years of demonstrating good credit to fix damage caused by poor credit repayment

In general, both positive and negative information remains on file for six years. Information on the date that the credit was granted also remains in your file.

If you have had a credit card for 20 years, only the last six years of your payment history will remain on file. Anyone looking at the report will be able to see that you have had the credit card account for 20 years.

Negative information, such as court judgments or late debt payments, is typically removed six or seven years after the filing date. Bankruptcies typically remain on a credit file for six years from the date of discharge.

Source : yourhome