What to Look for When Doing Tenant’s Credit Check

“What To Look For When Doing Tenant’s Credit Check” written by Mike Marko

You got the application to fill a new vacancy.  You did the basic background check, like checking landlord references, employment, etc.  

Now you’re wondering how good their credit may be… are there negative marks you need to factor in?  That’s where a credit check comes into play. 

What are the things to consider in doing the credit checkAnd what do we need to look for in doing the credit check?

In this article, I’m going to talk about what to consider when looking at the tenant’s credit check.

Evaluating The Credit Check For Rental Properties

Doing a credit check and learning the correct and most efficient way to evaluate the information is one of the most important parts of determining if the person qualifies to rent from you or if you’re going to rent to someone more qualified than them to rent to.

Why Do A Credit Check?

The credit check allows you to see all of the spending and financial history that the renter has established through credit reporting agencies. When getting a complete credit check done, you are able to see the renters history of spending and financial decisions that the potential renter has made establishing credit.

Looking further into a credit check, you should be able to weigh the risk (spending and financial habits) vs reward (renting the property) of a candidate. When you are able to develop a complete overview of evaluating the renter’s past credit, you will be able to determine whether the tenant is the best qualified renter for the property over other applicants.

What’s In A Credit Check

Credit reports are gold mine of information.  They help describe the spending habit of potential renters.  They help property managers make the most educated choice on who they want to rent to.

Credit Checks show the following:

  • Late payments and any patterns of non-payments the person may have
  • All discharged or still pending loans
  • Help establish an income to credit ratio
  • Show any bankruptcies or unresolved debt for up to 10yrs
  • FICO Score
  • All assets purchased that were funded via credit or loans

Financial History

When you are able to see an overview of a person’s financial history you will get a much better feel if you would want to rent to that person. The credit check from most agencies will show you a complete breakdown of financial history for that person being evaluated.

A complete financial history will show the following:

  • If the tenant was evicted from the former rentals.
  • Late payments, rents or bills, including student or car loans
  • If the tenant has a good credit history.

The last two items can be garnered from a credit check.  

The information that you can get from the credit reports traditionally covers the past seven to ten years. Other services available would charge accordingly to delve deeper into a person’s financial and credit history. Depending on the agency and the provided report, you will be able to more accurately determine if this possible tenant is qualified to rent the property.

Tenant Credit Check

In order for you to run a Credit Check for possible tenants, you must have the following information and signed releases.

  1. Name, Address, Social Security Number or ITIN (Individual Tax Identification Number).
  2. Signed application allowing a credit check
  3. Signed release allowing the property manager and their agents to look at and evaluate credit report for rental determination purposes.
  4. Any other required forms (according to your State and Local rental governing policies that allow you to run credit checks for property rental considerations.)

Ask The Tenant for the Credit Check Fee

There is a cost to doing the credit check.  I recommend covering the cost as part of the application fee.  Charges may vary, but the common charge is about 25-50 dollars.

Poor Credit Check

Ok, so occasionally you’ll encounter a bad credit check.  It’s to be expected because credit is often a reason why someone is choosing to rent over buying their own home.  

If the tenant does end up having a poor credit report… need to consider how bad that report actually is to you.  Will you require an additional deposit or an additional monthly rent in reserve? Be sure to check with your local laws and know what you can and can’t do when you do encounter a bad credit check.  

Be sure to instruct the tenant how they can get their own copy of the credit report from the agency you get the report from.  Don’t give them the report directly yourself.

Can a Tenant Provide a Self-Copy of his Credit Report?

While on the surface having the tenant provide a self-copy of their credit report may seem like a good idea, it’s not a recommended practice.  You don’t know the integrity of the information. By purchasing the report yourself, you know that the information is as accurate (and as up to date) as possible.  

Do The Tenant Credit Check and Be Wise

In this article, I talked about how to use the credit check to evaluate whether you want a candidate to rent one of your properties.  A credit check is part of the process to help avoid those “undesirable” tenants. Although it may seem like a hassle, doing the credit check can really help with the screening.

Now if you are looking for a less expensive way to score and underwrite credit and financial risk for rental applications, without the hassle, I recommend Top1Score.  Their premium service for scoring and ranking applications makes the process easy… at a fraction of the price.  

If you find this helpful please comment down below and share my article.  Thanks!




Suggested Articles:
1. What Is Property Management?
2. The 9 Best Background Check Tips
3. Renter’s Background Check

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Disclaimer: This commentary is a matter of opinion provided for general information purposes only and is not intended to be taken as investment or trading advice under any circumstances. Information and analysis above are derived from sources and utilizing methods believed to be reliable, but we cannot accept responsibility for any losses any person may incur as a result of this analysis. Individuals should consult with their personal financial advisers. By using this web site or any information contained in it, the user specifically and expressly agrees that no advisor-client relationship is created between said user and any author, owner, executive, or principal of this web site by either use of this web site, or by any information, product, or service offered by or on this web site. No express or implied guarantees or warranties as to investment or trading results are made, and any perceived insinuations of such are hereby expressly disclaimed.


Article: What to Look for When Doing Tenant’s Credit Check

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