What Credit Score Does Everyone Start With?

One of the most common questions first-time landlords ask is – what credit scores does everyone start with? Everyone can relate to the fact that credit scores can often feel like a race that you were enrolled in without your knowledge. For landlords, running a credit check is an important part of successfully screening tenants, and for renters, it often determines if a landlord is interested in your application. If you are confused about credit scores, how they are built, and what score everyone starts out with – keep reading as we guide you through it.

What is a Credit Score?

Starting with the basics – a credit score is a number that ranges from 300-850 based on your credit history (number of open accounts, levels of debt, and repayment history) that determines someone’s creditworthiness – the higher the score the more trustworthy you are perceived by lenders or, in the rental business, a landlord. By utilizing this data based on your consumer report, your credit score acts as a predictor of whether or not you will be delinquent in the future and if you pay all of your expenses – including rent.  

Before a person has anything on their record to analyze, they simply have no credit score. There is no magical age at which a credit score is given to you – a credit score is created only when there is data to analyze. Everyone begins without a credit score and it will require six months of history in order to create a person’s first credit score. 

What Affects Your First Credit Score

When someone is building their credit, there are a few situations that might determine what their credit score will be – it’s important to make sure you understand certain situations when you are looking at applicants with fresh credit scores.  

1: Short History and Few Accounts

If someone only has one account open, that means they have a short history to pull data from. This means they will most likely have a relatively low credit score. Even if they have been making payments on time and have no negative behavior, they may pull a mid-range score because there is insufficient data to project a higher number. Essentially, there is uncertainty someone will keep paying on time when there has only been a short amount of time to analyze their behavior.

2: Short History and Poor Payments

If someone starts out their credit history with missed payments or other negative factors, they can start with an extremely low score. With a short history and missed payments, the forecast of how that consumer will behave moving forward is considered negative.

3: Young Age and High Credit Score

If an applicant is young and has a high credit score, it might seem suspicious. However, usually, this means they were an authorized user on an adult’s credit card account. Parents often add their teenage children as an authorized user, meaning they receive a credit card with their name on it, for emergencies or other expenses. Authorized cardholders aren’t responsible for the repayment of debts and don’t have other privileges as the primary cardholder does. But, if the primary cardholder is consistent with repayments then it can help establish good credit for the authorized user at a very young age.

How to Handle Young Credit Scores

More often than not, the question of a starting credit score comes when landlords are dealing with younger applicants – especially if you rent in a college town. Young applicants haven’t had time to build their credit unless they were an authorized user on an account, and often, even if they haven’t done anything negative to their credit score, they simply do not have one for you to inspect.

As a landlord, when you are screening tenants it can be difficult to determine if someone who is young and has a new or non-existent credit score will be a reliable tenant. Credit scores aid landlords because they are often a good indicator of how responsible someone is with paying their bills, and in turn, paying rent. Even if someone has a middle of the road credit score because they just started building their credit, it doesn’t mean they are irresponsible or will be a terrible tenant – it is simply too early to tell via a number.

The best way to handle new credit scores or non-existent scores is to ask for a co-signer. This method is often employed by those renting to college populations. When you ask for a co-signer, screen the co-signer the same way you would a tenant – you could also charge a larger security deposit.

Tips for Landlords When it Comes to Tenant Credit Scores

When it comes to running a credit check, here are a few things landlords need to remember:

  • Before you run a tenant credit check make sure to be transparent and let them know you require it for every applicant – if they object it could be a red flag.
  • Decide how you will cover the cost – most landlords include it in the rental application fee.
  • Once you receive their rental application and consent, make sure you also run a complete tenant background check in addition to the credit check.
  • Make sure you use a secure system to run a credit check as you will need to collect sensitive information: name, social security number, and date of birth.
  • The general rule of thumb for landlords is to accept a score of 560-850 and potentially even 538-559.

Tips for Renters on How to Build A Good Credit Score

If renters ask you how they can build their credit score to be considered as a tenant, make sure you tell them how they can educate themselves and follow a few simple steps:

  • Always pay your bills on time
  • Keep your balances low on your credit cards
  • Don’t open accounts just to have more of a credit mix
  • Always check your report so you can dispute any inaccuracies
  • Consider signing with a co-signer while renting with a low credit score

Remember that no credit score exists until there is six months of data on a consumer’s report. Running a credit check and thorough tenant screening is your best insurance as a landlord to protect your rental business. 

Credit Score FAQs

Should I accept a tenant with no credit score?

Just because an applicant has no credit history, doesn’t necessarily mean they are irresponsible and won’t pay rent. Like we mentioned above, they are most likely young or haven’t had the opportunity to build their credit. In this type of situation, it is smart to ask for a co-signer who does have a reliable credit score.

Should I screen co-signers as well?

Yes, you should also screen a co-signer just like you will screen the main renter. This way you can make sure they have a good credit score and no criminal background – protecting you and your rental should always come first. 

How long does it take for someone to receive a credit score?

It takes six months of credit history for someone to receive a credit score – remember, it might seem low at the beginning, but that doesn’t mean they are not making payments consistently. 

Disclaimer: TurboTenant, Inc does not provide legal advice. This material has been prepared for informational purposes only. All users are advised to check all applicable local, state and federal laws and consult legal counsel should questions arise.

This blog was updated from its original post on June 24th, 2020.

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