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Owners
It’s very important for landlords to run a credit check on a potential tenant. It’s actually one of the most important things you’ll want to do as a property manager because you’ll lower your personal risk of getting stuck with a renter that doesn’t pay their rent.
Sometimes the past isn’t the best indicator of how your potential tenant will handle their present finances but it is a way to see how financially sound a potential renter is. Here is what you should know about running tenant credit checks.
Which credit report should a landlord use?
Landlords can choose from three credit report types or get all three done. You also can get their FICO score. The credit bureaus are Equifax, Experian and TransUnion. They will all tell you something different since businesses report to only one or two bureaus causing data to differ on various reports.
The sum of the three reports will give you a more complete picture of your potential renter’s credit history but it will cost you more. You can charge the tenant for the cost but you may have a hard time getting applicants if you charge too high.
Treat all tenants the same
You are wise to run credit and backgrounds checks on every tenant rather than picking and choosing. You’ll avoid discrimination charges because everybody will get the same treatment.
What are red flags in the credit check?
A red flag to look for is late payments on a credit history. If a tenant pays their bills on time, you are less likely to be chasing them down for back rent. You also don’t want to find yourself paying for an eviction down the line because you didn’t notice that your tenant pays bills late and doesn’t pay their rent on time with you. Look for delinquent debts because this is a sign that your tenant has an issue paying their bills in general.
Pulling your tenants credit report is important to look for these red flags that will let you know the likelihood that your tenant will pay their rent timely and consistently. Treat all tenants the same in the application process and remember that credit checks are a way to reveal potential pitfalls of a potential renter.
