If you’re applying for a lease, it’s important to understand that a credit check may be involved. Landlords want to ensure that tenants will pay their rent on time every month, and one way to assess a prospective tenant’s ability to pay is by checking their credit score. But is this allowed? Can a landlord request a credit check when you apply for a rental unit?
Key Points
- Landlords are allowed to request a credit check in Canada, though you must provide your consent.
- Landlords may ask for a credit check as a way to assess your ability to cover rent payments.
- A landlord credit check may accompany a general background check, which may include reviewing references or a possible criminal past.
Can Landlords Perform Credit Checks?
Yes, it’s legal for a landlord to pull a tenant’s credit report when assessing a lease application. However, landlords must obtain written consent from the tenant before performing a credit check.
Credit checks from landlords are considered hard inquiries. Hard inquiries may negatively affect your credit and will remain on your credit report for 3 to 6 years.
Why Do Landlords Check Your Credit?
A landlord credit check is often involved in a lease arrangement. Landlords want to be assured that you’ll make your rent payments on time every month. As such, credit checks may be part of the screening process.
Ultimately, your credit report helps landlords evaluate your risk level. A higher credit score may be indicative of a more trustworthy and reliable tenant who won’t have to be chased down for rent payments. A lower score, on the other hand, could paint the picture of a riskier tenant who may not be trusted to submit their rent cheques on time.
How Will Your Landlord Access Your Credit Report?
Landlords may ask for your consent by sending you a separate document to sign, or they may include it in your rental application, which authorizes them to check your credit.
Once your landlord has your consent, they may pull a copy of your credit report from either Equifax or TransUnion, which are Canada’s two credit bureaus. In some cases, a landlord may also access your credit report through third-party services that do background and credit checks on tenants.
What Do Landlords Look For When Checking Your Credit?
When a landlord checks your credit file, they’ll be able to see the following:
Payment History
Your bill payment information is recorded on your credit report. This includes on-time, late, and missed payments. So, if you have a lot of late, missed, or partial payments, it can indicate that you’ll have trouble paying your rent on time. This can cause the landlord to reject your application.
Debt Load
If you’ve had a lot of problems with debt in the past, this could deter your prospective landlord from approving your lease application. Even if you’re moving into a low-rent, small apartment, your future landlord may be hesitant to rent to you if your income is not high enough to cover your rent and debt obligations.
Derogatory Remarks
Many landlords will also look for any derogatory remarks on your credit report to determine your financial risk and financial responsibility. Previous evictions, a foreclosure on your house, and accounts in collections are all red flags.
What Is Considered Good Credit In Canada?
In Canada, credit scores range from 300 to 900. Where your credit score falls along the spectrum determines whether you have good or bad credit.
The following chart shows how credit scores are classified based on specific ranges:
| Credit Score Rating | Credit Score Range |
| Excellent | 760+ |
| Very Good | 725–759 |
| Good | 660–724 |
| Fair | 560–659 |
| Poor | 300–559 |
So, a ‘good’ credit score in Canada would be anything between 660 and 724. The higher your credit score, the better your chances of securing a lease, which can be beneficial in a particularly competitive rental market.
How Do I Check My Credit Score?
It’s a good idea to know what your credit score is before you apply for a lease. It’s wise to know where your credit stands at all times, even if you want to apply for a job, apply for a loan or credit product, or take out an insurance policy.
In Canada, you can check your credit score with one of the two major credit bureaus: Equifax and TransUnion. With Equifax, you can get your credit score for free once a year.
With TransUnion, you can get your credit report for free, but you’ll need to pay a small monthly membership fee to get access to your credit score. Those who live in Quebec are exempt from this subscription fee and can obtain their credit score for free.
You can also check your credit score at no charge using various online resources, such as the following:
| Cost | Credit Score | Credit Report | ||
 | Free | Yes | Yes | Visit Site |
 | Free | Yes | Yes | Visit Site |
 | Free | Yes | Yes | - |
Will My Landlord Perform A Background Check?
Like a credit check, a background check is often part of the screening process and another way for landlords to vet their tenants. The purpose of a background check is to make sure a tenant will comply with the terms of the lease agreement.
A background check can include the following:
- Criminal background check
- History of eviction or “unlawful detention”
- Verification of the tenant’s current employment
Can You Rent An Apartment In Canada With Bad Credit?
Having a low credit score doesn’t always mean that your lease application will be turned down. There may be ways to secure a lease despite a bad credit score:
- Get A Cosigner – If you have a parent, relative, or good friend who is willing to help, perhaps they can add their name to the lease as a co-signer. In this role, the co-signer will take over the rent payments in the event that you can’t (or won’t), and will provide the landlord with some assurance that they’ll receive full payments each month.
- Offer A Higher Security Deposit – A little extra monetary motivation may be enough to convince the landlord to approve your lease application. You can incentivize the landlord with a higher security deposit or by throwing in a few extra months’ worth of rent.
- Provide More Documentation – Consider providing your landlord with proof of employment letter, your income tax return, or even 3 months’ worth of bank statements. These documents may illustrate that you can afford the rent payments and will be a responsible tenant.
- Provide References – Ask your employer or your previous landlord to provide a reference for you, which may help convince a potential landlord that you’ll pay your rent on time.
- Explain Your Situation – If you’ve got an unfavourable credit score due to things like recent unemployment or temporary debt problems, try explaining this to the landlord. With any luck, they’ll sympathize and have a bit of faith that you’ll bounce back and approve you.
Bottom Line
Even with poor credit, this doesn’t have to mean staying in your parent’s basement for the rest of your life. However, taking the proper steps to build up your finances and keep your credit score at a reasonable level will definitely help you out in the eyes of your future landlord.
