How to Read a Tenant Credit Check

For most landlords, a good way to ensure excellent renters is to check tenant credit. While checking a tenant's credit will cost money, it is an expense the landlord can safely pass on to the renter. For most renters, paying an application fee is not a problem, and those who are not willing to pay will likely not qualify. Offering the application for free while still conducting a check will likely cause a slew of applications not worthy for the rental property anyway. A tenant credit check can be conducted through the traditional means of contacting the credit bureaus. It is important to require the same information and credit report from all applicants to avoid complaints with the housing authority.

What’s Required to Run a Credit Check

When you want to check tenant credit, you will need to request the applicant’s name, address, and social security number. You will need his or her consent to run the credit, so it is important to get the signature on the rental application to avoid any disputes later. This information will be required to run the credit check from all three bureaus. It is advisable to pull a report from all three bureaus because the information between all three may vary slightly, as it is up to each agency to report to whatever bureaus it wants to. Not using all three reports may provide a skewed view of the applicant.

How to Read the Credit Report

The credit report will contain name and address information. The address history presented on the credit report may also be used to verify the addresses used on the references. You will see a list of accounts and their balances, to help you judge how overextended their debt may be. You will also be able to see how many payments have been missed, how late the payments were made, and if there are any bills in collections. It is up to you to determine your requirements in this area, and if you are willing to let the applicants justify any of the negative information to you and prove that it will not happen again.

Denying the Rental Application as a Result of Negative Credit Information

If you decide to deny the rental application as a result of negative credit information, you must notify the applicant according to the Fair Credit Reporting Act. In the notification letter you should include the reason why you denied the applicant, the name and address of the agency that reported the negative information, and details the applicant’s right to obtain a free copy of the report by requesting it within 60 days from the date of the letter.

A credit check will give you a method of verifying information on the rental application and also give you insight into the applicant’s ability and willingness to pay their rent. One thing worth noting however, is that some people have issues in the past which may reflect badly upon their credit, but not their ability or willingness to pay. Many people will pay for their home before anything else, so sometimes the tenant credit check may prove to be slightly unjust.

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