How to Run a Tenant Credit Check
Learn how to run a credit check on a potential tenant to ensure they are a good fit for your property. This important step will help you avoid any financial headaches down the road.
Credit Check’ style=”display:none”>Checkout this video:
Know the law
The Fair Credit Reporting Act (FCRA)
The Fair Credit Reporting Act (FCRA) is a federal law that promotes the accuracy, fairness, and privacy of information in the files of consumer reporting agencies.
FCRA regulates how consumer reporting agencies can collect, use, and share consumers’ credit information. The FCRA also gives consumers the right to see their credit report, correct inaccurate information, and to know who has looked at their credit file recently.
When you run a tenant credit check, you are considered a “consumer reporting agency” and must follow FCRA regulations. This means that you must:
-Get the applicant’s written permission before running the credit check
-Use only reputable tenant screening services that follow FCRA guidelines
-Use the information from the credit report to make a fair housing decision – not discriminate against applicants based on race, religion, national origin, etc.
-Disclose to the applicant if they did not get approved for housing based on their credit report
-Give the applicant a chance to correct any incorrect information on their credit report
The Equal Credit Opportunity Act (ECOA)
The Equal Credit Opportunity Act (ECOA) is a federal law that prohibits credit discrimination on the basis of race, color, religion, national origin, sex, marital status or age. The ECOA also prohibits discrimination on the basis of receipt of public assistance income, or exercise of any right under the Consumer Credit Protection Act.
The ECOA requires creditors to give applicants equal treatment in credit transactions and to make credit decisions without regard to race, color, religion, national origin, sex or marital status. In addition, creditors may not consider an applicant’s age unless the applicant is younger than 21 years old.
The ECOA applies to all types of consumer credit transactions, including loans for homes, cars and other personal property; lines of credit; and credit card accounts. The ECOA also applies to all types of creditors, including banks, savings and loan associations, Credit unions, mortgage companies and retail stores.
Get the tenant’s permission
It’s important to get the tenant’s permission before running a credit check. The best way to do this is to use a credit check authorization form. This form should be signed by the tenant and should indicate that the tenant understands that a credit check will be run and that the information contained in the report may be used to make a decision about whether or not to rent to the tenant.
Get the form signed by the tenant
Before you can run a credit check on a tenant, you need to get their permission. The best way to do this is to have them sign a credit check authorization form. This form should give you permission to run a credit check and review their credit history.
Make sure that the form is clear and easy to understand. If the tenant has any questions, make sure to answer them before they sign the form. Once the form is signed, you can proceed with running the credit check.
Run the credit check
The first step is to run the credit check. This can be done through a variety of methods, but the most common is to use a credit reporting agency. The second step is to verify the information on the credit report .
Use a reputable credit reporting agency
When you’re looking to run a tenant credit check, it’s important to use a reputable credit reporting agency. There are many different agencies out there, so it’s important to do your research and find one that is reliable.
One of the best ways to find a reputable credit reporting agency is to ask other landlords and property managers who they use. They will likely have good recommendations for agencies that they have had positive experiences with in the past.
Another option is to search for online reviews of different credit reporting agencies. This can give you a good idea of which ones are well-respected and which ones tend to have more problems.
Once you’ve found a few potential agencies, you should contact them and ask about their services. Find out what information they will need from you in order to run the report. Most importantly, ask about their fees and turnaround time. This way, you can be sure that you are getting the best possible service for your money.
Review the credit report
A credit report includes information on where you live, how you pay your bills, and whether you have been sued or have filed for bankruptcy. Credit reporting agencies sell the information in your report to creditors, insurers, employers, and other businesses that use it to evaluate your applications for credit, insurance, employment, or renting a home.
Here are the steps for reviewing a credit report:
1. Get a copy of your credit report from each of the three major credit reporting agencies: TransUnion, Experian and Equifax. You can get your reports for free once every 12 months from AnnualCreditReport.com or by calling 1-877-322-8228.
2. Review each report carefully to make sure the information is accurate and complete. If you find errors, file a dispute with the credit bureau that issued the report using their online dispute process or by mail.
3. Check your statements every month to make sure there are no unauthorized charges. If you see something suspicious, file a fraud alert with the credit bureau and your local police department.
Take action
If the tenant has bad credit, consider requiring a cosigner
If the tenant has bad credit, you may require a cosigner on the lease agreement. A cosigner is someone who agree to be equally responsible for the rent and any damage to the rental unit, along with the primary tenant.
In most cases, a cosigner will have to meet the same qualifications as the primary tenant, including income, employment and rental history. The cosigner may also be required to undergo a credit check.
If you do require a cosigner, make sure that all parties understand their obligations under the lease agreement. Put everything in writing so that there is no confusion later on.
If the tenant has good credit, move forward with the lease agreement
If the tenant has good credit, you can move forward with the lease agreement. If the tenant has bad credit, you may want to consider requiring a larger security deposit, or finding another tenant.
