Understanding the Importance of Credit

Landlords want to be assured that you will pay your rent on time every month. One indicator they often use to assess your ability to pay your rent is your credit history and score. Because of the important role your credit history plays, be sure to check your credit report yearly to be aware of any blemishes or errors that you need to fix.

Your Credit Report

Your credit report is a record of money you've borrowed, your history of paying it back, and how much open credit is available to you. Landlords often rely on the information in your credit report as it signifies the likelihood that you will pay your rent.

The following appears on your credit report: 

• A list of debts and a history of how you've paid them, including credit cards, car loans, and student loans.
• Any bills referred to a collection agency, such as utility or medical bills that you did not pay or paid significantly late.
• Public-record information, such as tax liens and bankruptcies that may be linked to you.
• Inquiries made about your creditworthiness, showing how many inquiries were made about your credit and if you were given credit based on the inquiry.

Your Credit Score

Your credit score is a single number that helps landlords decide how likely you are to repay your debts. A score ranges from 300 – 850 points and is based on:

• Your payment history and ability to repay your debts on time. Late payments will lower your credit score.
• The amount of total debt you owe, including credit cards, student loans and car loans.If your credit cards are at their limits, this can lower your credit score - even if the amount you owe isn't large.
• How long you've used credit and how you’ve managed it. If you show a pattern of managing your credit wisely, keeping credit card balances low and paying your bills on time – your credit score will be positively affected.
• How often you apply for new credit and take on new debt. If you've applied for several credit cards at the same time, your credit score can go down.
• The types of credit you currently use, including credit cards, retail accounts, installment loans, finance company accounts, and mortgages.

A guide to interpreting your score:

• Credit scores ranging from 770 to 850 are generally considered very good.
• Credit scores above 700 are generally considered good, and most people have a credit score within this range. The median credit score is about 725.
• Credit scores below the mid-600s are generally considered fair or poor.