How to Run Credit Checks on Tenants

As a landlord, you want to make sure you’re renting to responsible tenants. One way to do this is to run a credit check.

In this blog post, we’ll show you how to run a credit check on a potential tenant. We’ll also give you some tips on what to look for in a good tenant.

By following these tips, you can help ensure that your rental property is in good hands.

Checkout this video:

Why you should run credit checks

There are a number of good reasons to run credit checks on prospective tenants. A credit check can give you a good indication of someone’s financial responsibility, and can help you to avoid problems down the road.

Credit checks can also help you to avoid potential problems with your rental property. If you rent to someone who has a history of not paying their bills, you may end up having to deal with damaged property, late rent payments, or other issues.

In some cases, running a credit check on a prospective tenant may also be required by law. For example, in some states landlords are required to run credit checks on all applicants who want to rent a dwelling unit that is covered by the state’s fair housing laws.

It is important to note that there are limits on how landlord can use information obtained from a credit check. For example, the federal Fair Credit Reporting Act (FCRA) regulates how landlords can obtain and use credit reports on applicants and tenants. The FCRA also gives tenants the right to see their own credit reports, and the right to dispute any inaccurate information that is contained therein.

How to run credit checks

Online

Running credit checks on tenants can help you screen them and ensure they will be able tomake rent payments on time. There are a few different ways to run credit checks, but checking online is often the easiest and most efficient method.

Here’s how to run a credit check online:

1. Go to the website of a credit reporting agency such as Experian, Equifax, or TransUnion.

2. Create an account and login.

3. Enter the tenant’s information including their name, address, date of birth, and Social Security number.

4. Click “Search” or “Submit” to generate the report.

5. Review the report carefully to look for any red flags such as late payments, collections, bankruptcies, or foreclosures. If you see any red flags, you may want to reconsider renting to that tenant.

In person

The first step is to access the Credit Report Request Form from the menu on the left-hand side of your screen. You will need to fill out this form completely and accurately. Make sure to include all required information, such as the applicant’s name, address, social security number, and date of birth. This form must be signed by the applicant in order for the credit check to be processed.

After you have completed the form, you will need to submit it to our office along with a copy of the applicant’s driver’s license or other government-issued ID. We will then run a credit check and provide you with a report detailing the applicant’s credit history.

What to look for in a credit check

You’re a landlord about to rent out your property to a new tenant. They look great on paper, but you want to make sure they’re actually going to be a good tenant. One way to do this is to run a credit check on them. This will give you an idea of their financial history and help you decide if they’re likely to be a good tenant or not.

Payment history

The first thing you’ll want to check is an applicant’s payment history. This is probably the most important factor in predicting whether or not someone will make their rental payments on time.

You can get this information from the applicant’s credit report. Most landlords use a third-party service to run credit checks on applicants, but you can also do it yourself if you have the applicant’s permission.

When you’re looking at an applicant’s payment history, there are a few things you’ll want to pay attention to:
-Whether or not the applicant pays their bills on time
-How often they’ve been late with payments
-How late they’ve been with payments (30 days, 60 days, 90 days, etc.)
-How much of their credit limit they’re using
-Whether or not they have any collections or charge-offs

Credit utilization

Your credit utilization is the ratio of your credit card debt to your credit limit. It’s important to keep your credit utilization low — below 30% — because it’s one of the factors that lenders look at when they’re considering you for a loan. A high credit utilization ratio can hurt your credit score and make it harder for you to get approved for a loan.

Credit mix

One important factor in your credit score is credit mix, or the variety of types of credit you have. For example, a mix of auto loans, student loans, and credit cards shows that you can manage different types of debt responsibly. On the other hand, if you only have one type of loan (e.g., student loans), that might not look as good to potential landlords.

How to interpret credit checks

When you are running credit checks on prospective tenants, you are looking for more than just a good credit score. You want to know how they have handled credit in the past, and you want to know what their current financial situation looks like.

Score

A credit score is a numerical expression of a person’s creditworthiness based on their credit history. Lenders use credit scores to evaluate the risk of lending money to a borrower. A high credit score indicates low risk, while a low credit score indicates high risk.

Most landlords use a potential tenant’s credit score as one factor in deciding whether or not to rent to them. A high credit score means that the tenant is likely to pay rent on time and keep up with other financial obligations, while a low credit score may indicate that the tenant is likely to default on rent or other payments.

When running a credit check on a potential tenant, landlords should look at the following factors:

– The tenant’s overall credit score: This is the most important factor in determining whether or not a landlord should rent to a tenant. A high credit score indicates that the tenant is likely to pay rent on time and keep up with other financial obligations, while a low credit score may indicate that the tenant is likely to default on rent or other payments.
– The tenant’s payment history: This includes whether or not the tenant has ever missed a payment, late payments, or had any collections accounts.
– The type of debt the tenant has: This includes revolving debt (credit cards) and installment debt (student loans, auto loans, etc.). Landlords should be especially cautious of tenants with high levels of revolving debt, as this can indicate financial stress.
– The length of the tenant’s credit history: A long history of responsible borrowing is generally more advantageous than a short history.
– The presence of any derogatory items: This includes bankruptcies, foreclosures, and tax liens. These items can indicate substantial financial stress and should be taken into consideration when evaluating a potential tenant’s ability to pay rent on time and keep up with other financial obligations.

History

Your credit history is a record of your past borrowing and repayment activities. It includes information about credit accounts you’ve opened, whether you’ve made your payments on time, and any debts you’ve incurred.

Your credit history is important because it’s one factor that lenders look at when considering you for a loan. A strong credit history can help you get approved for a loan with a lower interest rate, while a weak credit history can make it harder to get approved for a loan at all.

There are two types of credit histories: personal and business. Personal credit histories include information about your borrowing and repayment activities as an individual. Business credit histories include information about your company’s borrowing and repayment activities.

You can get a copy of your personal credit history from the three major credit reporting agencies: Equifax, Experian, and TransUnion. You can get a copy of your business credit history from business credit reporting agencies like Dunn & Bradstreet and Experian Business Credit Services.

What to do if you find something negative

If you find something negative on a tenant’s credit report, you may need to take some action. This could include requiring the tenant to pay a higher deposit, refusing to renew the lease, or even evicting the tenant. Let’s talk about what you can do if you find something negative on a tenant’s credit report.

Address the issue with the tenant

If you find negative information on a tenant’s credit report, it’s important to address the issue with the tenant directly. You may want to give them a chance to explain the situation or offer to help them improve their credit score. If the tenant is unable to provide a satisfactory explanation or improve their credit score, you may decide not to rent to them.

Consider other factors

When you find something negative on a tenant’s credit report, it’s important to take it in context. There are a lot of factors that go into credit scores, and one or two negative items might not be indicative of a tenant’s ability to pay rent on time.

If you can, talk to the tenant about the items on their credit report. They might have an explanation that makes you more comfortable renting to them. For example, if they had medical bills that went into collections, they may be able to provide proof that they’re now insured and won’t have the same issue with paying rent on time.

You should also look at other factors, such as:
– How long ago the negative items were reported
– The severity of the negativity (for example, a late payment is less serious than a bankruptcy)
– The tenant’s rental history (if they’ve always paid rent on time, that’s a good sign they’ll continue to do so, even if their credit score isn’t perfect)