16 Sep Why Your Credit Score Matters When Renting Property

A common credit score myth is that your credit score doesn’t matter when renting properties or taking out home loans.

The truth is, your credit score is integral to optimising your rental prospects. Seef Group says that one of the most important things landlords check before renting property is your credit score. Why? Credit scores show your payment history: whether you pay on time, have defaulted, and how much you owe in debt. This is to mitigate financial loss. If you’ve defaulted or paid late in the past, you will likely not pay on time, or at all, in the future—similarly, the more debt you have, the less free income you’ll have to spend on rent.

Moreover, financially stable tenants are less likely to move out prematurely. This saves them money on advertising for new tenants, screening tenants, and preparing the property for new tenants.

How does having a good score affect you? Let’s discuss the impact of your credit score on your rental prospects and why landlords value these weighty 3 digits so much.

Why Your Credit Score Matters When Renting Property

Before we discuss why credit scores are important to landlords, we should establish an understanding of what they are.

Credit Scores Explained

Credit scores are 3-digit representations of creditworthiness. They’re calculated using various factors. Usually, they range from 300 to 800, though this can vary from bureau to bureau. For instance, XDS’ scoring criteria runs from 300-1000. Conversely, Experian’s scores run from 300-800.

Credit scores are calculated using credit utilisation rate, payment history (late payments, defaults), derogatory marks (judgments, debt review, administration orders, garnishee orders, etc.), and the amount of hard inquiries you had lately.

Is It Expressly Credit Scores That Matter?

No– landlords often request your credit report in its entirety. This way, they can see whether you’ve defaulted (not paid someone back), paid late, or have a high DTI (debt-to-income ratio).

Yes, they do see your credit score, though often alongside your full report.

How Credit Scores Affect Your Rental Prospects

Your creditworthiness doesn’t solely affect your landlord. The better your credit score, the stronger your negotiating power and the better your prospects are. If you’re perceived as a low-risk tenant, you’re likely to be able to negotiate lower rent, longer rental periods, and other favourable conditions. In addition, you’ll access rental prospects often only offered to financially stable prospects: ones in higher-end areas or with more trustworthy neighbours.

Besides rental prospects, excellent credit scores also increase your chances of accessing loans with favourable terms, like low interest, longer repayment terms, and lower deposits. You might also access lower insurance premiums, better chances at employment, and of course, rental opportunities.

How to Boost Your Credit

Building credit is as simple as building healthy credit habits: paying on time and not spending too much credit. When you pay on time and in full, your credit score goes up. Moreover, not using too much credit at once keeps your credit utilisation rate (how much credit you spend compared to what you have available) low.

It also helps to not obtain many hard inquiries on your credit profile at once. Hard inquiries are formal requests for your credit profile from lenders, insurers, or anyone who plans to debit money from your account on credit. Too many at once lowers your score and can make it seem as if you’re desperate for credit.

If you would like help building your credit score or have questions about your score, contact Credit Boost. Check your score for free online using Credit Boost’s free credit checker. Get a full report in minutes with only your ID and cellphone number.