Finding an affordable apartment you love in the neighborhood of your choice can feel like you’ve won the lottery. But before you can call the movers, you’ll need to take the first step and go through the screening process. In most cases, this means filling out a rental application.
Rental applications are a way for landlords to determine whether or not a potential tenant will be responsible when it comes to paying the rent. In order to do so, the property owner or management company may also ask for a credit reference. This is a person, company, or document that provides details about your credit history.
There are different types of credit references, and your landlord may require more than one to ensure you’ll be a no-risk, trustworthy tenant.
What Are Credit References on a Rental Application?
Along with asking for your name, address, employment information, and past residential history on your application, a landlord will want to make sure you regularly meet your financial obligations. After all, a landlord or property manager doesn’t want to take a risk on someone who doesn’t pay their monthly rent in full and on time. This is where a credit reference comes into play.
Credit references are documents, businesses, or individuals that can verify your credit history. Similar to character references a prospective employer might request before they hire you, a credit reference refers to a person or a company with whom the applicant has had a positive financial relationship.
The credit reference provides the landlord with details about an applicant’s financial situation, such as the length of the financial dealings with the entity, the applicant’s payment record, and whether they’re in any debt.
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How Does a Credit Reference on a Rental Application Work?
When you decide upon an apartment rental, the first thing you need to do is notify the landlord or property manager as soon as possible, especially if you live in a city where rental competition is stiff. If the place is still available, you’ll be asked to submit a paper or electronic rental application.
Depending on the landlord or property manager’s application process, you may be asked to provide credit references on the form. This could entail listing any current creditors’ names and contact information, detailing the amounts owed on any loans, or answering whether or not you’ve ever declared bankruptcy.
After you’ve completed the application, the landlord will typically contact the credit sources you provided. It’s best to be honest when filling in any past and present financial information on the application. If not, chances are the landlord will find out on their own during the credit reference check. Not being truthful at the start can be a glaring red flag for the landlord, increasing the likelihood they’ll reject the application.
Types of Credit References
There are several kinds of credit references a landlord may use to confirm you’re in good financial shape and will be able to afford the monthly rent. Financial agreement documents such as asset documentation, credit reports, and character reference letters are some things landlords often request.
Read on to learn about three types of credit references a landlord may require:
Credit Report
Credit reports — a credit check used by employers, lenders, and landlords to gauge how responsible a person is when it comes to managing credit and handling their financial obligations — are the most commonly used credit reference. These statements detail someone’s credit history, including their payment record, current account balances, and any outstanding debts, including those referred to a collection agency.
There are three major credit bureaus that issue credit reports. A landlord may use one or two of these credit reporting agencies or order a more comprehensive tri-merge credit report, which culls data from all three companies.
As part of their credit check, landlords may request your FICO score or, less commonly, your VantageScore. In either case, this is a three-digit number that reflects how dependable you are when it comes to paying back borrowed debt. Both companies use a 300-850 credit score range.
Landlords typically look for a score of 600 or above. Depending on whether they pull your credit score through FICO or VantageScore, where the number lands in the 600 plus range may be considered a good or fair credit score. For instance, FICO’s fair credit scores are between 580 and 669, while their good credit range is between 670 and 739. VantageScore’s fair credit scores range from 601 to 660, and good credit falls between 661 to 780.
According to the Fair Credit Reporting Act, a landlord cannot run a credit check without your prior authorization. And, if you do give permission to run a credit check, the landlord may charge you an additional fee, so be sure to check your rental application carefully.
💡 Quick Tip: Check your credit report at least once a year to ensure there are no errors that can damage your credit score.
Asset Documentation
Asset documentation gives proof of a person’s financial assets and is considered a highly effective type of credit reference. Landlords may want to know if an applicant has back-up funds for rent in case there are unseen circumstances, such as job loss.
A landlord may ask you to provide certain documents, such as several months’ worth of statements from your current checking, savings, retirement, and/or investment accounts. In order to obtain these records, you’ll need to ask the financial institutions who manage your assets to provide them to the landlord or property management company, unless you can supply them on your own.
Recommended: Do Banks Run Credit Checks for a Checking Account?
Character and Credit Reference Letters
Professional and personal references can be a great option for vetting someone’s financial reliability. While a landlord might be more interested in your credit score and asset documentation, a character reference letter may help give you an edge.
Character reference letters can come from a previous landlord, employer, faith leader, professor, or an entity you’ve previously done business with, like a utility company. Ideally, you’ll want to get a letter from any source that can speak to your reliability and conscientiousness and explain why you’d be an ideal tenant.
How Do Credit References Impact Rental Applications?
Credit references can have a significant impact on whether or not you get the apartment. If the landlord reviews your credit history and has any concerns about your income to debt ratio or low credit score, they can turn you down.
On the flip side, seeing a stellar record of paying your bills on time and verifying you’ve been a trustworthy tenant in the past can help convince a landlord you’re the right choice.
Examples of Credit References
• Letters of reference from any former landlords stating you’ve paid your rent routinely and have had an issue-free relationship
• A copy of your credit report
• Checking or savings account bank statements
• Documentation from a utility company listing a positive payment history
• Character reference letters from personal or professional acquaintances
When You Need Credit References on an Apartment Application
Generally, landlords will want credit references when considering whether to approve an application of a first-time renter, someone who makes a lower salary, or a person who has no credit history. In such scenarios, the renter will want to consider having a guarantor or cosigner on the application.
Guarantors or cosigners are people who have good credit and can sign the lease with you. A cosigner can be a parent, family member, or friend who agrees to take legal responsibility for paying your rent if for some reason you can’t.
How Long Does It Take to Process a Rental Application?
In most cases, rental applications are approved within 24 to 72 hours. Property management companies that oversee larger complexes and have ample staff can process applications faster than a solo landlord.
It may take longer to approve an application when, for example, you’re applying with a cosigner or if you’re renting with roommates. That’s because there are more people involved, more credit references to gather, and more credit reports to pull.
Tips for Credit References
Prepare in Advance
You may not be initially required to provide credit references on your application, but that doesn’t mean a landlord won’t ask for it later. Get your ducks in a row by gathering any necessary paperwork and reaching out to anyone you may want as a character reference.
If you think you’re going to need a cosigner, start a conversation with that person so they’re not totally blindsided or asked to commit at the last minute.
Check Your Credit Report
Running and reviewing your credit report can tip you off to any errors, indicate any fraudulent activity, and provide your current credit score. You can also resolve any credit issues that might give a landlord a reason to reject your application.
According to the Consumer Financial Protection Bureau, you are entitled to request one free copy of your credit report every year from each of the three credit bureaus. You can order your free report by visiting AnnualCreditReport.com . Note that all three credit report providers are offering free weekly online credit reports until the end of 2023.
You can also sign up for credit score monitoring through SoFi and get insights on your financial health and credit.
Choose Your Character References Carefully
Make sure the people you’re asking to vouch for your dependability are those you trust, know well, and will be able to communicate clearly what makes you a good renter.
Don’t Be Afraid to Give the Landlord a Head’s Up
Sometimes a lower credit score or a record of late or missed payments may not be your fault. Certain life events can cause financial upheaval, such as being a victim of identity theft, getting laid off, or abruptly losing a roommate, leaving you responsible for the entire rent.
Writing a letter to the landlord offering an explanation for the spotty record — and attesting you’re working hard to improve your credit — may save you from being rejected outright.
💡 Quick Tip: An easy way to raise your credit score? Pay your bills on time. Setting up autopay can help you keep your account in good standing.
The Takeaway
When applying for a rental apartment or home, providing solid credit references allows a landlord or a property manager to determine your ability to pay the rent in full every month. Credit references can impact whether or not your application is approved. Knowing what types of credit references you may have to produce — and taking care to monitor your credit report and clean up any issues — can help boost your odds of landing that coveted home.
Take control of your finances with SoFi. With our financial insights and credit score monitoring tools, you can view all of your accounts in one convenient dashboard. From there, you can see your various balances, spending breakdowns, and credit score. Plus you can easily set up budgets and discover valuable financial insights — all at no cost.
FAQ
What should I put as a credit reference?
Your landlord will typically be the one to dictate what credit references they want. But if they only run a credit report, you may want to send along anything else that could bolster your financial worth, such as savings and investment account statements.
What is an example of a credit reference for an apartment application?
Examples of credit references may include your bank, previous landlords, companies whose bills you pay regularly, supervisors, or your faith leader.
How do you get a credit reference?
You may be able to obtain a credit reference by requesting a copy of your credit report, authorizing a credit check, or asking for a character reference letter.
How many credit references do you need?
It depends on the landlord. While some won’t ask for any credit references, others will require one or more. To be safe, it’s probably a good idea to plan for at least two
Can you buy a credit reference?
No. Credit references need to be earned by capably managing your money, paying your bills, and having minimal debt. While you can pay a credit repair company to go over your credit report and dispute any errors on your behalf, you still have to do the heavy lifting of diligently meeting your overall financial responsibilities.
Photo credit: iStock/FluxFactory
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