To kick off this topic, we would like to share a story that, although fictionalized, is all too common in our state and community. When Sarah, a single mother in LaPorte, finally saved enough money for a security deposit and first month’s rent, she thought her housing search was over. She had a steady job, excellent references from her previous landlord, and rental assistance from a local nonprofit. But application after application came back denied.
The reason? Her credit score of 580, the result of medical debt from an emergency room visit two years earlier, fell just below most landlords’ minimum requirements.
Sarah’s story isn’t unique. Across Indiana, thousands of low-income renters with money in hand are being locked out of safe, affordable housing not because they can’t pay rent, but because a three-digit number says they’re too risky. In a state already grappling with a severe affordable housing shortage, credit scoring practices have become an invisible barrier that disproportionately impacts those who need housing most. Tenants are often screened by a number, nothing more, with no recourse to set the record straight.
The Credit Score Gatekeeper
Credit scores have become a near-universal requirement in today’s rental market. Nearly 90 percent of landlords reported that they checked for previous evictions, income, job history, rental history, credit scores, and criminal backgrounds when making their decisions. For many property managers across Indiana, a minimum credit score between 580 and 670 is standard, and anything below that threshold results in automatic denial. For larger rental companies that rely on AI to screen these applications, it results in an instant rejection; there is no way to share the reason behind it, as in Sarah’s case, such as a medical bill or perhaps a lapsed student loan payment.
Nearly half of Americans’ credit scores fall between 750 and 850, which corresponds to the very good to exceptional range, while 25% of Americans have a score between 300 and 649, which equates to the poor to fair credit score range. While that segment may seem small, it represents millions of Americans, and many Hoosiers.
When Credit Scores Measure the Wrong Thing
There’s absolutely no evidence that credit scores have value in predicting whether a renter will pay their rent, despite the long-misheld belief that this is a key indicator. “Credit scores are designed for one thing only: to predict whether a consumer will be late on a loan,” according to Chi Chi Wu, senior attorney at the National Consumer Law Center.
Yet landlords often use these scores as the main determining factor of renting to potential tenants, often through third-party tenant screening companies that package credit information with eviction records and criminal backgrounds into a single “pass” or “fail” recommendation. Landlords increasingly capture this data from screening services, which typically cost $40 per applicant and are most often paid by renters. This means low-income renters are paying for a service that will deny them housing.
The Disparate Impact on Vulnerable Populations
“Tenant screening scores and recommendations create a misleading veneer of objectivity while concealing underlying racial disparities,” according to Ariel Nelson, staff attorney at the National Consumer Law Center. The result is that tenant screening practices disproportionately exclude renters of color from housing opportunities, even when they have the financial means to pay rent.
Income level also significantly affects credit scores. Low-income families have a median credit score of 658, moderate-income families have a median credit score of 692, middle-income families have a median credit score of 735, and high-income families have even higher scores. This means the very people who most need affordable rental housing, those with the lowest incomes, are most likely to be denied because of their credit scores.
The irony is devastating: those who struggle financially often have lower credit scores precisely because of the same circumstances that make affordable housing so critical, such as medical emergencies, job loss, student loan debt, and family crises. Yet, these circumstances become permanent marks against them when they seek housing.
Indiana’s Affordable Housing Crisis Compounds the Problem
Credit barriers hit particularly hard in Indiana, where the affordable housing shortage is already acute. According to Prosperity Indiana and the Hoosier Housing Needs Coalition, the state has just 38 affordable rental homes available for every 100 extremely low-income Hoosier households. When credit screening eliminates even more options for those who need them most, the path to stable housing becomes nearly impossible to navigate.
Across Indiana, property managers set varying minimum credit score requirements. Many local-area property management companies require minimum scores between 580 and 670, with some refusing to consider any applicant with a score below 600. For renters with fair or poor credit, this effectively eliminates a significant portion of the rental market, even if they have sufficient income, rental assistance, or housing vouchers.
Federal Guidance on Fair Housing
The U.S. Department of Housing and Urban Development has acknowledged the problems with credit screening. In 2024 HUD guidance, the agency emphasized that when it comes to credit scores, overbroad screenings could have an unjustified discriminatory effect, according to HUD. There are likely other methods to determine an applicant’s ability to pay rent.
HUD’s guidance document on tenant screening makes clear that landlords and property managers may generally forgo credit checks for potential residents as long as they do not discriminate against them because of a protected characteristic under the Fair Housing Act. The guidance recommends that it is also a best practice to use alternate forms of verification of ability to pay for any prospective tenant without traditional credit.
Despite this federal guidance, the reality on the ground in Indiana and locally remains challenging. Most landlords continue to require credit checks, and few have adopted alternative methods of assessing an applicant’s ability to pay rent on time.
The Ripple Effects of Credit Barriers
When low-income renters are denied housing because of credit scores, the consequences cascade through every aspect of their lives. Unable to secure stable housing, families are often forced into higher-cost short-term rentals, remain in substandard housing with health and safety issues, or face the very real risk of becoming unhoused.
In 2022, half of all US renters were cost-burdened, according to the Harvard Joint Center for Housing Studies, meaning they spent more than 30 percent of their income on rent and utilities. Among these renters, 12.1 million had severe burdens, paying over half of their income for housing, also an all-time high. In La Porte County, this number is even higher at 48% of renters. For those with poor credit, finding any housing, let alone affordable housing, becomes a nearly insurmountable challenge.
Children also bear a significant burden. When families are unable to secure stable housing due to credit barriers, children experience disruptions in their education, healthcare, and social development. The instability that results from credit-based housing denials perpetuates cycles of poverty across generations.
Alternative Approaches Exist
The good news is that alternatives to traditional credit screening do exist and are being used successfully in some markets. Some approaches include:
Positive Rental Payment Reporting: Rent reporting can be beneficial by significantly increasing credit visibility, helping tenants transition from having no credit score to establishing a credit score, and can assist in raising existing credit scores to near-prime levels (above 601) for those with low or no prior credit history. Programs that report on-time rent payments to credit bureaus can help renters build credit while also providing landlords with direct evidence of rental payment history.
Income-Based Screening: Rather than focusing on credit scores, some landlords prioritize income verification, requiring applicants to earn 2.5 to 3 times the monthly rent. This approach directly measures the ability to pay rather than relying on a score that may not predict rental payment behavior. While this may work in some cases, due to the high cost of rental units, this is often not available to cost-burdened renters.
Alternative Documentation: Bank statements showing consistent deposits, proof of on-time utility payments, and letters from previous landlords can provide concrete evidence of financial responsibility without relying on credit scores alone.
What Needs to Change
Addressing credit as a barrier to rental housing in Indiana requires action at multiple levels:
For Landlords and Property Managers: Review screening policies to ensure they don’t rely solely on credit scores. HUD’s guidance emphasizes that housing providers should offer applicants the opportunity to address any negative information that may disqualify them. This is to provide mitigating information. Consider alternative methods of assessing ability to pay rent, such as rental payment history, income verification, and references.
For Policymakers: Support legislation that limits how credit scores can be used in rental housing decisions, particularly for properties receiving any public funding or tax credits. Provide funding for rent reporting programs that help low-income renters build credit. Increase resources for emergency rental assistance and housing counseling services.
For Housing Advocates: Continue educating renters about their rights under the Fair Credit Reporting Act, including the right to dispute inaccurate information and receive notice when denied credit or screening based on a report. Advocate for fair screening practices and support renters in navigating the housing search process.
For the Community: Recognize that credit scores are an imperfect measure that disproportionately impacts those who have already faced economic hardship. Support organizations working to expand affordable housing and remove barriers to housing stability.
A Path Forward
Just as Indiana took steps to address eviction records as barriers to housing through Senate Bill 142, the state can lead the way in addressing credit screening practices that lock low-income Hoosiers out of safe, stable housing. With Indiana seeing one of the highest eviction rates in the country and an acute shortage of affordable housing, removing unnecessary barriers isn’t just good policy; it’s essential for community stability and prosperity.
The current system creates a cruel catch-22: those who most need affordable housing are most likely to be denied because financial hardship has damaged their credit. But economic hardship doesn’t predict whether someone will pay rent when they have the means to do so. What it does predict is that without stable housing, recovering from that hardship becomes exponentially more difficult.
Breaking this cycle requires recognizing that credit scores, while useful in some contexts, should not be the primary gatekeeper to one of the most fundamental human needs: safe, affordable housing. For the thousands of Hoosiers like Sarah, who have the income, rental assistance, and determination to be good tenants, credit screening practices shouldn’t be the barrier that keeps them from achieving stability.
For Indiana to truly address its housing crisis, we must ensure that all Hoosiers have a fair chance at accessing safe, affordable homes, regardless of the number that may have more to do with past hardships than future potential.
