Finding a new rental home can be overwhelming
Sometimes it's hard to know where to start. There are so many requirements and requests from perspective landlords, it's hard to know where to start.
I'm going to walk you through what is required, what landlords can and can't ask for and credit reports.
Be Prepared & Organized
Finding a new home will be a job onto itself and so you should treat it that way. Have all of the information that is required prepared and ready to submit with an offer. If you prepare to do things electronically, put everything into a PDF sorted by topic. If you are more comfortable with paper, then have a number of packages printed so that that you can simply drop one off when required. You do not want to be running around finding things if you can avoid it.
Why Do I Need To Provide All of This?
The answer to this may not be popular, but the reality is the Landlord/Tenant act favours the tentants so it is extremely difficult to evict someone, even for nonpayment of rent or damage to property. The process is time consuming and can be very expensive for the landlord so they need to be very careful that they are choosing someone who is not a risk to miss payments, damage the property or cause disturbances. This problem has also been made worse by COVID as eviction hearings and eviction fulfillments did not occur during lockdowns. Although landlords are typically allowed to increase rent each year as mandated by the Landlord/Tenant Board, these increases (around 2% each year) have not been allowed during COVID which further highlights the importance in making sure suitable tenants are chosen.
All Landlords will want to see financial documents that will prove your availability to pay the rent and any other expenses such as utilities.
Acceptable documents include: 3 of your most current pay stubs, a letter of employment and the summary page from your most recent income tax return. You don't need to provide all of these. I would suggest a letter of employment plus pay stubs.
You should never provide copies of your bank statements, copies of your investments, your banking account numbers or your social insurance number. Landlords are not allowed to ask for them.
Every rental application will ask for references, but one of the most impactful things you can do is have your references write letters that you can provide with your application package. Ask every landlord, work and personal reference to write a quite note explain why you would make a great tenant. Obviously letters from previous landlords will be most impactful. Remember once you receive a written letter, either on paper or electronically, you simply make copies so you can keep them for future home applications too.
Don't wait until asked to provide those letters, submit them proactively when you provide the application package. Both the landlord and the realtor (if they are utilizing one) will read those and it can have a great impact on their decision to move forward with you.
There is no other aspect of renting that is more debated and contencious than the topic of credit reports, so I am going to discuss why they are important and what you can do to quickly improve your score.
There are only two agencies in Canada that provide credit reporting services: Equifax and Transunion. All of the other services providers obtain their information from either of these two sources.
You are legally entitled to one free credit report from each organization every year. In order to obtain the free copy you must call their customer service departments, verify your identity then they will mail you a printed copy. This can take weeks to obtain. You can also obtain your score through some online banking applications and you can pay for your report online.
Equifax is by and large the most utlized source and preferred choice of credit reports. It is easy to understand and most realtors and landlords are familiar with it. You can go online and purchase your report where you can instantly download a PDF copy. I feel it is well worth the investment as it is then easy to send with your applications.
It is important to look at your credit report at least once a year as it is your best indication if you have been a victim of fraud or if there are mistakes on your bureau that may be impacting your credit score.
The question I receive most often about credit scores is why are they so important? The simplistic answer is the best indication of future behaviour is past behaviour. If you have traditionally paid your bills on time and not overextended yourself financially you should have a decent credit score.
Many people will argue that when times are tight, they pay their rent and get "caught up" with other bills when they can so it doesn't impact their ability to pay the landlord. That may be true but what many people don't realize is that there is more to it than that.
From a financial perspective you should typically not be spending more than 35% of your monthly after tax income on housing expenses. So that means if you make $5,000/month after tax your home, utlities and home insurance should not exceed $1,750. If your rent and other home expenses are a lot more than that, you are putting yourself in a financially delicate position which is where most people run into problems.
What Can I Do To Improve My Credit Score
- Get a copy of your credit report and make sure there are no errors or mistakes
- Be proactive! If you know this is going to be a tight month financially then proactively reach out to those organizations where bills are due and make payment arranagements. If you make arranagements ahead of time it shouldn't impact your credit score
- Make arranagements to pay off your debt as quickly as possible. Sometimes just clearing up an outstanding balance on an old cell phone plan can improve your score a great deal
- Pay your bills at least 3 business days ahead of the due date if you are paying online. Although paying your bills online appears to happen instantly, it doesn't. It can take a few days for all of the various computer systems to sync so if you wait until the last minute your online payment through your financial institution may not register with your creditor in time.
- If you have to pay your bills on the due date then try paying them directly on the creditor's website or call them with your confirmation number
- Book an appointment with your financial institution so that they can walk you through your credit report and provide feedbank on which things you can do to quickly improve your score and which will take a while.