Why Should You Check A Tenant's Credit Report?

Why should you check a tenant's credit report? A property manager checks credit reports and financial history to determine what kind of tenant a person will be. A high credit score makes a tenant less of a risk.

While nothing is a guarantee, a person who pays their bills on time and has no past due financial obligations generally will more likely to pay you your rent on time. If an applicant has a history of seriously delinquent bills, court judgments and evictions, chances are they will not be able to pay you either. Gary Knippa, a property management company owner in Austin, TX says that it is very important that a landlord checks an applicant credit history before agreeing to rent to the. "First, we do like to see a high credit score. A high credit score would be 200 or lower on a scale of 1,000. If there is marginal credit and everything else checks out well, normally a property manager will then look little closer at the credit report to see if the credit is chronic or not, or a one time event that is unlikely to reoccur that caused the tenant's credit to go bad."

While a satisfactory credit history is ideal, it is understandable that some otherwise responsible people may have fallen on hard times as a result of circumstances beyond their control and deserve a second chance. Knippa explains that "A typical example [of this] might be a medical issue that occurred two years ago and you know bills went unpaid because that person was paying off medical bills. You know, was it is a one time event or was it is just tons of bad credit over five years?" While an occasional blemish due to an illness, layoff or dispute with a creditor is understandable, excessive derogatory credit items should raise a red flag for you as a landlord.

In order to look at an applicant's credit file, you will need to submit a request to one of the major credit reporting bureaus (Experian, Equifax and TransUnion). There is a fee for pulling the report, which is usually covered by the prospective tenant's application fee. If you use a property management company to screen applicants, then they will be the ones to pull the applicant's credit report and make the final decision on whether or not to approve them for a lease. In order that you are looking at the right person's report, make sure you ask for a photo ID of your applicant and make sure their name, date of birth and social security number is written legibly and correctly on the rental application; this is very important in order to view the person's credit report.

It is also extremely important that you abide by the Fair Credit Reporting Act when pulling an applicant's consumer report. The FCRA is federal legislation that protects consumer's private financial information and requires that the information of a person's consumer report is accurate. The FRCA also requires landlords to let applicants know in advance that their credit will be checked and provide them with a written explanation if their application is denied based on information that was provided in their consumer report. Following the FCRA protects you from any liability in the event that an applicant makes a complaint claiming they were denied for an apartment unfairly.

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