Statista.com reports that approximately 45 million housing units in the United States are occupied by renters. This indicates a growing demand for rental units.
Are you looking to rent a new space? You've probably been asked to complete a rental application with your rental history, contact information, employment information, social security number, and credit reference.
Credit references are often part of the tenant screening criteria. But what is a credit reference on a rental application?
Let's learn more about a credit reference and how it can affect your rental approval.
What Is a Credit Reference on a Rental Application?
This is a document that verifies your credit history. A credit reference for a rental application is mainly used to support a rental application or apply for a loan. Property management companies and landlords use this document for rental background checks.
Additionally, landlords can measure how likely tenants are to pay rent on time with a credit reference. If you have a good credit reference, landlords will likely consider your rental application.
What Are the Different Forms of Credit References?
There are various forms of credit references with different levels of effectiveness. Below are the common forms of credit references that a tenant can present to the property manager or landlord during the rental application process:
A Credit Report
This includes a detailed overview of an applicant's current debt, payment history, and credit history. A credit report is the most effective form of a credit reference, and it's more likely to increase the chances of your rental application being approved.
Asset Documentation
Asset documentation is proof of investments, liquid cash, or income. It proves to property managers you're financially stable and can withstand unexpected situations such as a job loss.
Your landlord may request an offer or verification letter from your employer. If you have a large number of assets, you can request asset documentation from the financial company or brokerage you work with. These assets may be in the form of:
- A savings account
- Bonds
- Stocks
- Retirement funds
Note that having more assets increases your chances of getting approved.
Financier Support Letters
These letters are meant for business owners to prove they have enough capital to buy or pay rent. If you have an adverse credit history, you can get a cosigner to write a letter stating how they will support your rent if needed.
Character Reference
This is the least effective type of credit reference. Character references are a great option for tenants renting their first home or with little to no credit. A previous employer or landlord issues a character reference to provide information about your payment history and character.
How Does a Credit Reference on Rental Applications Work?
Property managers and landlords use various tools for tenant screening to find the most qualified applicants. The credit check process involves you providing a list of institutions or businesses that can give a recommendation or offer personalized information about previously working with you.
In most cases, landlords check your credit references and access your credit reports. The rental application may request that you provide more than one credit reference and give them permission to contact them.
Credit references include previous landlords, a company where you regularly pay bills, or a bank with which you have a loan or credit card. If you're applying to rent an apartment with another person, they must also present their credit references.
You're expected to provide the business's phone number, address, and name for every credit reference. The property manager contacts your credit references for information about your payment history and account status. If any of your credit references provide damaging information about you, your rental application may be denied.
Some landlords may hesitate to approve your rental application if your previous property manager refuses to provide a reference.
Landlords and property managers should ensure their tenant screening criteria do not violate the Fair Housing Act. According to these laws, landlords shouldn't discriminate against tenants because of disability, family status, sex, national origin, color, or race.
What Should a Credit Reference on Rental Applications Entail?
A credit reference letter should contain relevant information to help the property manager or landlord determine whether you're the right candidate for rental approval. When asking other people to write a credit reference for you, ensure you review it and include any relevant information they may have left out.
This information consists of the following:
- Your name
- Your contact information (email address and phone number)
- The contact and legal name of the individual or institution referring you
- How long your business has been in existence
- The loan repayment history
- Billing address
- A confirmation that the data provided is true and accurate
- Permission to reach out to references to confirm the accuracy of the information you've provided
How to Get Rental Approval With a Credit Reference
Rental approval factors can help boost your chances of rental approval from a landlord. Below are some tips that you can use to make a good impression:
- Have all the relevant information when writing the credit reference letter
- Provide information promptly when asked to
- Clarify any mishaps that may affect your creditworthiness, such as illness or loss of a job
- Be transparent about any past evictions
If you're unable to provide a credit reference on time, it can make it challenging to get a rental application approved. Additionally, if you have a history of missing loan repayments or cannot get a cosigner, your rental application will likely be denied.
To avoid this, you can create a renter profile to ensure you have your credit report at hand. Otherwise, you can request a character reference from your former landlord before searching for a new apartment.
Get a Rental Application From Touchstone Realty LLC Today
What is a credit reference on a rental application? When you're looking to rent a new apartment, most landlords will request proof that you earn an income and honor your debts. Credit references come in credit reports, asset documentation, or character references.
At Touchstone Realty, LLC, we're here to help you find a new home that fits your needs, no matter your budget. Our rental application approval process is fast, and you can be settled in your new apartment in just two days.
Contact us today to find the perfect home for yourself and your family.
