How To Check Credit Score of Potential Tenant: 5 Best Methods

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Ready to learn how to check the credit score of a potential tenant? Think you can simply log in online and have all the answers that you need in a just a few minutes?

Don’t get too carried away with those kinds of daydreams!

While running a credit check on a prospective tenant might seem like something that you need to do as soon as you receive a rental application, there are a number of things that you need to consider before you rush ahead without thinking about why you really need to do this and how it will benefit your rental business.

Ultimately, a credit score and report can be the ultimate indicators of whether or not a tenant can be trusted as reliable. Most landlords will not rent to those with low credit scores without an extra large security deposit, but you won’t even be able to know if you should charge this if you don’t understand what you’re trying to get from the report.

Today, we’ll talk about five pro tips for running the report the right way, using the information the smart way, and doing all of this the efficient way. Let’s get started!

A Table of Contents for the Credit Check on Prospective Tenant

Use A Reputable Agency

The best way to get a credit check on prospective tenant applicants is to use a reputable agency that you can be sure will do the work the proper and legal way.

When it comes to looking into someone’s credit, there are a lot of rules and regulations about what you are allowed to see, how you are allowed to use that information, and how that information must be disclosed to the applicant.

When you are trying to do the reporting yourself, it can be overwhelming, and there is the chance that you will make a mistake and end up in some legal trouble.

To save yourself both the hassle and the risk of doing this yourself, using a reputable agency that specializes in screening checks is a great way to protect yourself while simultaneously getting all of the information that you need.

Plus, specialized agencies like RentPrep will help you decode what the information you are receiving means for you, your properties, and your business. All of these factors make using a professional agency the best method for running credit checks.

Alternatively, Run It Directly

The three most commonly used credit bureaus – Experian, TransUnion, and Equifax – all have credit check services that can be used by landlords for either a small fee or for nothing at all. The reports that these services give, however, may not have the specific details that you could get from a specialized reporting service.

Each of these credit bureaus may have different information, so it is possible that you will not be getting the complete picture if you do not check out all three or use a service that will balance which files it checks before coming back to you with a completed report.

Ultimately, we believe that specialized services can help you get a fuller picture of what the applicant might be like as a tenant.

What To Look For In A Credit Check

Once you’ve finished running the credit check, you might be left wondering exactly what you should be looking for with the information that you have. How can this information tell you whether or not an applicant is a worthwhile risk?

If you’re using a specialized agency like RentPrep, the report that you are given will include basic information about whether or not a tenant is recommended based on the gathered information.

If, however, you got the report in another way, you’ll need to do a bit more thinking about what you need the credit check to tell you.

There are three main red flags that you should be looking out for.

Negative Items

Look for any accounts that are labeled as discharged, past due, or in collections. Usually, this can be found on the first page of a credit report when you first look at it. All of these account markings are indicators that the tenant had trouble paying their bills on time or at all.

Prior Evictions, Foreclosures, Bankruptcies

Does the report show any of these negative aspects? Usually, they are marked on the list of accounts on each page of the report. The details of each situation might not be given, but the basic flagging details should be enough to let you know what happened.

Late Payments

Looking at individual accounts and loans, you can find out if there were late payments. Additionally, check the number of late payments and how late the payments were. This information will paint a picture of how reliable the tenant could be.

Accepting Or Rejecting

Ultimately, the credit report that you receive might end up being a major factor in the decision you make about whether or not to rent to a specific applicant.

If you like the report’s results, great! You can continue the rental process.

If you aren’t sure about the tenant after seeing their report, try discussing the report with them to see if they can offer any explanations or insight into what might be confusing data. Pending their answers, you might decide that they are worth the rental risk after all.

If you decide that you will not rent to someone because of their credit report, it is your responsibility to send an Adverse Action letter detailing why you are rejecting their application.

If you decide to rent to someone with a less-than-ideal credit score and you want to charge more for a security deposit as a form of risk-protection, you will also need to send out a similar Adverse Action letter detailing what requirements you are adding and why they are necessary to add.

Collecting Information Needed For A Credit Check

Before you are able to do any of the report gathering or analysis of steps one through three, you’ll need to get basic information about the tenant as well as their permission to run a credit check.

You might even want to collect a fee to cover the cost of running the credit report, but that is ultimately up to you to decide.

Make sure that you ask for the following information on the rental application form so that you can run the credit report quickly and accurately:

  • Full legal name
  • Last two years of address history
  • Social security number
  • Date of birth
  • Employer name
  • Landlord name

Additionally, you will need the tenant’s expressed permission to run a credit check. This should be added as a clause to the rental application that must be signed and dated by the tenant. If you do not have their permission as stipulated by the Fair Credit Reporting Act, you could get in some legal trouble for trying to run a report.

Finally, you will also need to let the tenant know that it is possible for them to get a copy of the report that you receive. You should give them detailed contact information for the reporting company so that they can do this if they decide that it is necessary to do so.

Verify Basic Information Before Running The Report

Have you ever tried to run a report with the information that was provided to you in a rental application only to discover that all of the information was incorrect? Most landlords have encountered this situation at one point or another.

Before you set out to run a credit check on a prospective tenant, pick up your phone and do some basic verification.

First, call their employer. Confirm that they have the same address listed on file with the employer and that they have truly been working there for as long as they say that they have been working there.

Then, call their most recent or current landlord. Confirm that they lived where they said they did. It’s also a good idea to ask the landlord some questions about the tenant to get a better understanding of what type of tenant they will be if you decide to rent to them.

Once you have this information confirmed, you can file the necessary paperwork to run a credit check. By doing this little bit of extra work before filing, you will be able to ensure that you don’t waste your time on a report that will come back empty.

Check Up On Applicants

As you can see, there is a lot that can be riding on whether or not a credit report comes back positive. Many landlords ultimately deny a potential tenant because of their credit report, so running a credit check on a prospective tenant should be one of the most important parts of your screening process.

To get the full lowdown on how to screen tenants in the most effective way possible, let RentPrep assist you in your tenant screening procedures. With the right tactics, you’ll be able to find the best and most reliable tenants in no time at all.