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How to Perform a Credit Check on a Potential Tenant

As a landlord, your primary responsibility is to find stellar tenants to occupy the property – tenants who pay the rent and take care of their rented property as if it were their property. The difference between finding a good tenant and someone who appears to be a weakling can be determined in the information you discover when performing a credit check on a potential tenant.

The least expensive way to perform a credit check is to do it yourself. If you hire a service to perform the credit check, background check and eviction report for you, this can cost from $ 29.99 or more for one person and from $ 19.99 to $ 34.99 for each additional tenant. However, if you are willing to take the time and effort, the credit check may not cost you anything. The biggest challenge is knowing what to look for when you have the credit check in front of you.

 

Credit services

Credit services

Each of the three credit bureaus offers a screening procedure for tenants with which you can make a credit report of potential tenants. You can choose one of the services to draw your reports.

  • Experian . There are no costs for landlords to check a tenant credit using Experian.
  • TransUnion . The total fee for receiving a credit report, a credit recommendation and a criminal background check is $ 30 via TransUnion.
  • Equifax . To receive an Equifax credit report, independent landlords must go through the national association of independent landlords. The costs are $ 15, 95 for an extensive credit report. Full criminal background checks cost $ 29, 95.

I have used all three credit bureaus to collect credit reports for future tenants. Every process is smooth, easy to understand and affordable.

Another option is to use a service that allows you to retrieve the credit reports from all three credit bureaus at the same time. CreditReport.com has an option for landlords to do exactly that: Enter all tenant information only once and receive all three credit reports. It is best to review all three credit reports, as each creditor reports to different credit bureaus, giving you a more complete credit history for the tenant.

 

Steps you must take before you perform a credit check

Steps you must take before you perform a credit check

Although the websites you use may differ during the credit check, there are some general steps you must take first:

  1. Make sure you have a complete rental application and permission to execute a voucher for every tenant 18 or older . Provide a pre-printed form that each tenant must complete to collect his or her full name, date of birth, social security number, previous address and contact details of the landlord for the past two years. The form must also include a statement stating that you intend to perform a credit check at the tenant, as well as a signature line on which the tenant signs as permission to allow you to perform a credit check.
  2. Collect a voucher from potential tenants . The prospective tenants request a fee for carrying out a credit check. This covers the fee that you must pay for requesting the credit report from the agencies or credit check websites.

 

What to look for on the credit report

What to look for on the credit report

Once you have a credit report, view the different sections for possible red flags:

  • Negative or possibly negative items . This is usually on the first page of the credit report. You can find all accounts that are overdue, discharged or included in collections in this section.
  • Bankruptcy, eviction or foreclosure on a house . These negative figures can be found in the negative items section of the report. You can also find these instructions in addition to the account to which it relates in the specified list of accounts on the following pages of the credit report.
  • Individual credit accounts and loans . You can view any account for late payments. The report will state whether the account is up-to-date and – if there are late payments – how many times the account has been paid late. In addition, the report indicates what time the payments were, such as 30 days, 60 days or 90 days delinquent.

 

How to tell a good tenant from a bad one

Past behavior tends to predict future behavior. If tenants have a history of not paying their bills or continuing to pay their bills afterwards, it is likely that Cora Helmicks will continue this behavior in the future, meaning rent payments will be late or missed.

On the other hand, people do change. If the late payments or non-payments are old and the tenant has paid bills on time since the negative item or items, then it is possible that it was a one-time error or that they are working to correct their behavior.

For example, someone who filed for bankruptcy five years ago but has since established a new credit and has consistently paid his bills on time is an example of someone who has a blemish on his credit report but can still be a good tenant. A tenant who has a home foreclosure or who has one or more collection accounts from former landlords is another story. This is a potential tenant that you may want to avoid.





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