“The Information Included In Full Credit Report” written by Mike Marko
How can you know if a rental applicant is financially stable?
Besides trying to find a crystal ball, getting a full credit report of your tenant is the best way for you to check applicant financial stability. That means that as a property manager, you should be knowledgeable about the information that you can find in a full credit report.
The information that you will see in a full credit report will help you in making an informed decision whether or not to accept a tenant.
In this article, we will discuss the common information that you will find in a credit report. I will also share with you the important items that you need to look for in the full credit report. So without further adieu, let me help you to know more about your tenant’s full credit report.
Parts Of A Full Credit Report
A full credit report is the most complete report that shows a person’s credit history. This type of report is useful for property managers who are in the middle of screening tenants and need to sort and decide which tenant are most qualified to rent the property.
The information given in the report will give you an idea of how good is the possible tenant when it comes to paying bills. You can also find out if the tenant still has enough cash or credit to pay the rent after paying his or her debtors.
When you are screening a possible tenant, you usually get all the basic information about them. Along with checking into the tenant’s background rental history and employment histories, it’s common to do a credit check to help determine their financial stability and history.
As important as a tenant’s background check reports detail, the full credit report of a tenant often affects or influences the final decision of property managers whether they will approve or reject their rental application.
A full credit report is much like a simple credit report. However, there are some major differences between the two types of reports that I will detail in the following sections…
Just like a simple credit report, the first part or section of a full credit report will be occupied by the personal information of the prospective tenant.
A full credit report will usually include the following:
- Date of Birth
- Addresses (Current and previous addresses)
- Name of current and past employees
- Social Security Number (SNN)
Contact information such as their telephone numbers, mobile numbers, and email addresses are also included in this part.
The second part of a full credit report can be the same as a simple credit report but has much more detailed information which includes information about the past credit activities of the prospective tenant. The items on this part of the credit report are called credit history. This section usually includes the information about the tenant’s accounts on banks, credit card company, and other creditors for the past 10 years. Here’s the various information that you can usually find in this section:
- The date when the account was opened
- Credit limits
- Monthly balance
- Monthly payment history
Some items in this section, particularly the positive ones will stay for at least 7 years. On the other hand, the bad or negative items such as late payments, tax liens, and civil judgments will remain for at least ten years.
15% of the tenant’s credit score will come from their credit history. So every time you are reviewing a full credit report it is advisable to check these items:
- Late payments
- Mortgage, auto, or other loan defaults
- Tax liens
- Civil judgments
The items above are examples of negative items on the credit report. It is not uncommon for a tenant to be rejected for renting if they have any of the negative items on their credit reports. Usually, most experienced property managers often reject possible tenants who have late payments on their credit report. Late payments are an indication that the tenant has a bad habit of not paying their rent on time. Tenants who have shown a history of paying bills late or rents late can cause stress and problems if you rent to that individual and they continue these bad payment habits when paying rents.
The last section of a full credit report includes a list the names of persons, organizations, or agencies that requested the possible tenant’s credit report.
Credit inquiries are often occupied by:
- names, addresses, and contact information of lenders
- credit card companies
- service providers
Items on this section only last for two years but each item can temporarily result in a slight dip in the tenant’s overall credit rating. One credit inquiry takes at least five points from the overall credit score.
People with six credit inquiries are usually on the risk of a bankruptcy than those with no inquiries on their reports.
A credit score represents the overall rating of the credit report. This three-digit number which is a numeric representation of a person’s credit history ranging from 300 to 850.
The credit score is often referred to as an F.I.C.O. score and a different way of calculating and assigning this score are done by the 3 major credit bureaus: Equifax, Experian, and TransUnion. Each of the 3 major credit bureaus uses different criteria for assigning a credit score.
To get the most complete and detailed credit score and history a credit report that runs and evaluates all three credit bureaus is suggested.
A high credit score basically means that a person has a good credit history. A good credit score can be achieved by having minimal debt and paying bills on time. The average score of a good credit score is around 700, anything more than 650 means that a person is financially stable.
Here’s how a credit score is calculated:
- 35% Payment history
- 30% Amounts owed
- 15% Length of credit history
- 10% New credit
- 10% Types of credits used
To find out more about credit scores, you can check out http://www.intendhomes.com/three-credit-scores/ or you can check the three major credit bureaus for more information: Equifax, Experian, and the TransUnion.
A full credit report is normally required to get the following information on the tenant. These items are not normally included in a simple credit report. Some items such as public records and personal statements are also included. The number of items that will appear on the credit report will only depend on the agency that you’ve used in ordering a credit report.
Types of Public Information
Here are the three types of public information that you can see in a full credit report.
- Tax Liens
- Civil Judgments
These items will last for at least 10 years. But unpaid tax liens will remain on the credit report for 15 years.
Why is it important to look for these items?
These are indications that the applying tenant is currently having a financial struggle. You may want to avoid these types of applicants as it may cause you problems specifically when it comes to paying the rent.
Almost all credit bureaus will include personal statements on the credit reports. This is important to lenders and especially property managers like you because it will explain why do the negative items happen.
If the negative items on the tenant’s full credit report happen a few years ago, you can still consider the applying tenant as a possible candidate. It’s advisable to arrange a personal meeting with the applicant and talk about how are they fixing the negative items on their credit report.
Final Thoughts About A Full Credit Report
We just took the time to talk about what is in a full credit report. A full credit report contains basic information about the prospective tenant’s credit history. Along with their identifying information, a full credit report will include their credit history, credit inquiries, personal statements and public information.
Having a full credit report will help you in predicting the financial stability of your rental applicant. This will, in turn, help you make an informed decision about whether to rent to them or not.
Feel free to add your comments or questions in the section below.
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