How to do Tenant Credit Checks in Canada

Can I rely on this person to pay rent? The most important question to any landlord—and one that a credit check can help answer.

Together with income and rental history, credit scores give you a peek at what your landlord-tenant relationship ought to look like in the future. A useful (and legal) credit check, though, requires a bit of prep work. 

Below is a quick look at how to do tenant credit checks in Canada the right way. 

Helpful starting points

• You are allowed to decide not to rent to someone based on their credit history, but you’re not allowed to decide based on race, color, religion, sex, familial status, disability, marital status, age, sexual orientation, gender identity, or source of income.
• Credit scores are updated every 30 days. If an applicant gives you their score and it’s older than 30 days, it’s best to request a newer one (or run one yourself).
• The credit check is just one part of an effective tenant screening checklist and shouldn’t be your only deciding factor.

8 steps to running an effective and legal credit check in Canada

Get to know your provincial regulations

Before anything else, acquaint yourself with any regulations around credit checks in your specific province. This will make for a smoother process and give you the peace of mind of knowing you’re doing everything above board. 

As a starting point, here’s a list of useful resources for Canadian property owners by province.

Define your ideal candidate

What does a tenant's credit situation need to look like for you to approve them as a tenant? Defining early on the type of credit check (hard or soft) minimum credit score, income requirements, and other factors you need to see will make for a smoother, faster process for everyone involved. 

If you don’t have these ideal characteristics in mind, here’s a general breakdown of credit score grades in Canada to help:

• Poor (300-579)
• Fair (580-669)
• Good (670-739
• Very Good (740-799)
• Excellent (800-900)

It’s best to go deeper than just the score and look for things like:

• proof of income 
• status of accounts (i.e. paid in full or not)
• payment history (i.e. payments made or missed consistently)

Also, say a tenant has a less-than-ideal credit score. You might still approve them if they have a guarantor or are able to pay additional months of rent upfront.

Let applicants know you’ll be running credit checks

Under the Personal Information Protection and Electronic Documents Act (PIPEDA), you’re required by law to inform potential tenants that you’re going to do a credit check on them. Inform them why you’re doing it, the credit reporting agency you’ll be using, and how their personal information will be handled. Ideally, this information is included in your rental agreement but it can also be communicated elsewhere (still in writing). 

Also, explain your timeline (when they should expect to hear back) and whether you’ll be doing a soft or hard credit check. While soft checks won’t affect tenants’ credit scores, hard checks will—and it’s important to make this clear. 

Get written consent from applicants

Even if someone verbally consents to a credit check, it’s important to also get that consent in writing. If any confusion or issues come up in the future, a signed consent form can straighten things out more quickly and effectively than he-said she-said. 

Gather necessary applicant info

You’ll need a tenant’s full legal name, current address, date of birth, Social Insurance Number (SIN), and contact details to perform a proper credit check on them (and verify you’re performing a credit check on the right person).

Decide on a credit reporting agency

In Canada, TransUnion and Equifax are the two major credit reporting agencies. There are differences between them and how they come up with their scores, and it’s best to do your own research, but they’re fairly interchangeable in terms of the information they provide. 

Run credit check 

There is typically a fee for pulling credit reports from either TransUnion or Equifax, although landlords and renters signed up with Rhenti can pull credit reports for free.

Another option is asking applicants to provide their own credit reports. As long as you accept soft credit checks, this approach also won’t cost you anything. 

Decide based on results

Compare what you find in the credit report with the approval criteria you defined in step one. Is the applicant’s score high enough, are they up-to-date on payments, do all signs point to them being someone you can trust to pay rent on time?

Or are there signs of potential untrustworthiness: missed payments, bankruptcies, or foreclosures, for example? If so, it’s often worth at least speaking with the applicant to learn more before deciding.

An easier, more affordable way to run credit checks

While straightforward, running credit checks on your own takes time. Depending on how many applicants you’re considering, they can also get expensive. 

Rhenti fixes both of these issues with its digital applications, which automatically collect and present all necessary tenant information, including reference information and credit reports, powered by TransUnion.

Handle all of your leasing and marketing needs with one platform by signing up for Rhenti today.