“Who Are The Major Credit Reporting Agencies?” written by Mike Marko
Do you have an idea about the major credit reporting agencies and the kind of job they do?
If you are a property manager, you need to get a credit report for an applying tenant as a part of the tenant screening. And the major credit reporting agencies could provide you the credit report you need.
The three major credit reporting agencies are Experian, TransUnion, and Equifax. These are usually the go-to agencies for anyone who needs to get credit reports like lenders, property managers, and other financial institutions.
If you do not have an idea what kind of job do these credit reporting agencies do, then let’s talk about it in this article.
Getting To Know These Major Credit Reporting Agencies
The job of the 3 major credit reporting agencies is to collect all the necessary information about a person’s credit history. They then produce a “credit report” that businesses and individuals can use to determine a customer’s or client’s creditworthiness. The information that they collect will be useful for you as a property manager since it will help you determine if an applying tenant has a capability in paying rental fees.
The major credit bureaus are not owned by the government and they are all for-profit companies. Since they are for profit they have a connection with banks, credit card issuers, lenders, and other financial organizations from where they get all the details of a credit history of a person. All these details can be found in a credit report that they issue in exchange for a fee.
What Kind Of Information Do Credit Reporting Agencies Collect?
Usually, when you order or pay for a credit report of an applying tenant, you will see information about their current and past credit accounts. You can also find out about their payment history from various financial institutions, such as credit card companies, banks, mortgage companies and other lenders that they had in the past.
Non-lending organizations, such as telephone and utility companies may also give information to credit agencies. Usually, they only report about late payments and other negative information such as if the account is sent to collections which is helpful in determining if the tenant will pay their rent on time.
The three major credit reporting agencies can gather a lot of information about your applying tenants. Generally, these agencies can give you the information that you may use in making a decision to accept or deny an applying tenant.
The five key factors that they include in every credit report are:
- Payment history
- The types of account in a person’s credit file
- A person’s amount of debt
- How long a person has a credit
- The number of hard inquiries on a person’s credit file.
You can use these five key factors to determine the creditworthiness of an applying tenant. Those factors will give you a hint whether the applying tenants can pay their rent on time in the future. Knowing how responsible a tenant is in paying their bills on time is a big factor when determining who is the best tenant to rent to…
What Do They Do With This Information?
When the major credit reporting agencies, TransUnion, Equifax, Experian are finished gathering all those information mentioned earlier, the next thing they do is compile the credit history of the person and generate the credit report. Once they have a credit report for a person, they exchange that information back to the lenders and financial institutions for a fee. The information that is disclosed in the credit report is commonly used to help people like lenders to decide whether or not to lend to a person.
As a property manager, you can also use the information on a credit report in deciding whether to accept or deny an applying tenant’s rental application.
How Long Do Credit Bureaus Keep The Information On The Credit Reports?
A person’s personal information and a positive financial information like a strong payment history can be found on the credit report of the applying tenants.
However, you also have to watch out for negative information that your possible tenants have. This information will give you an idea if they are someone you could rely on when it comes to paying their rent.
Depending on the kind of item on the report, each of the following items may last for even up to 15 or more years on a person’s credit report:
Bankruptcy: Ten years from the date of filing for Chapter 7 filings, seven years for Chapter 13 filings and seven years for each record marked as “included in BK”
Charge-Offs (when a creditor writes off the balance of a delinquent debt, no longer expecting to be repaid): seven years
Closed Accounts: Seven years if the account was paid late, no expiration date if the account was always paid on time
Collection Accounts: Seven years from the last late payment on the original account
Inquiries: Two years
Late Payments: Seven years from the date of the late payment
Judgments: Seven years from the filing date if paid; longer if unpaid
Tax Liens: Fifteen or more years if left unpaid, seven years from the date the lien is paid.
What Is The Difference Between Credit Reports and Credit Scores
There is a difference between a credit report and a credit score. The credit report that is issued by the credit reporting agencies is used in coming up with a three-digit credit score of a person. The three-digit score is the numerical representation of a person’s creditworthiness.
As a property manager, it would be helpful for you if you know the credit score of an applying tenant. Normally, a good tenant should have a credit score of 600 or over.
Final Thoughts About The Three Major Credit Reporting Agencies
I hope this article gave you enough information about the three major credit reporting agencies. As a property manager, it is advisable that you carefully assess the information you can find in an applying tenant’s credit report. Use the information that you will get to help you decide if the potential tenants should be accepted or denied on their rental application.
Be sure to comment below if you have any comments or questions.
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