“Facts On Credit Report Landlord Must Know” written by Mike Marko
Property leasing is a good business venture to get into. But it’s not exempt from risks.
One of the risks is that you don’t always know who you’re dealing with when you lease property to someone.
Do you know what your tenant is capable of? Can you trust your property with them? Are they responsible?
How do you know they won’t damange your property in short order? Or start running an illicit business out of it?
The good news is that there’s a credit report landlord process you can rely on. A credit report is just what you need to ensure your rental business will run as smoothly as possible.
If you’re new to this business, then maybe you’re not quite familiar with a credit report yet. Don’t worry because today, I’ll talk about the things about a credit report landlord must know.
The Credit Report Landlord Process
Running a credit check on your tenant will give you a lot of information about them. And with that information, you’ll have an idea of what kind of tenant they’re going to be.
There are a lot of things in a credit report landlord must consider before choosing a tenant.
But before I discuss the things in a credit report landlord must know, let me first define what a credit report is.
What Is a Credit Report?
A credit report contains a detailed account of individual’s credit history. In simple terms, it’s a compilation of information about how a tenant handles financial matters.
Also known as a credit history or credit file, a credit report is prepared by a credit bureau. The credit bureau collates information on an individual’s credit and creates a report based on that.
A credit report is an important piece of document, especially to lenders, insurers, and employers.
But how about credit report landlord? Is it important to property owners just like you?
Importance of a Credit Report
The answer to the question above is yes. If you’re going to rent out your property, it’d be useful for you to know the financial capability of your prospective tenant.
Well, having a credit report for your tenant can help you save time. It tells you which applicants for the tenancy are better bets than others.
For instance, consider the fact that tracking down a tenant to collect rent every month is very time-consuming.
A credit report will inform you if your prospective tenant is likely to pay their rent on time… making chasing after them an unlikely task for you in the future.
A credit report can also save you from being stuck with debt. This is the case if you need your tenants’ rent payments to pay off a mortgage.
A credit report landlord check will help you choose only tenants who are financially capable. That’s another way it would be useful to you.
Aside from that, it also protects your property.
Of course, you want someone who is responsible enough to take care and avoid any damages to your property. You’ll know in a credit report landlord check if your prospective tenant has a history of causing property destruction.
These are just some of the reasons why credit report landlord is important. It’s because it can give you lots of information.
But what other information in a credit report landlord check might you find useful? Let’s answer that question next.
Information in a Credit Report
A credit report includes basic identifying information about your tenant. That includes the name, address and social security number.
Here you can validate whether the information in the tenant’s application form is the same as what’s on the credit report.
The report also includes credit information such as payment history and debts. This gives you an idea of how your prospective tenant manages their debts.
It also reflects how late or delinquent your prospective tenant is when it comes to payments he’s currently making. That might give you an idea of what he’ll be like when it comes to rent payment.
Public record information such as bankruptcies, evictions, and civil suits is also included in a credit report.
Since you know your prospective tenant’s background, you’ll have peace of mind that you’re getting a renter you can trust to follow the law.
That’s a lot of information from a single document! It should show you exactly why a credit report landlord check is worth doing.
So now, let’s move on to getting a credit report. How are you supposed to do it?
How to Get a Credit Report
Before getting a credit report, ask your tenant first to complete a rental application. You need to obtain the following information, in particular:
- Complete tenant’s name,
- Present address, and
- Social security number or ITIN (Individual Taxpayer Identification Number).
Be sure to get authorization from your prospective tenant before you try to order a credit report landlord check. Inform your tenant that you’re going to do it, or you could get in legal trouble.
Aside from that, tell him/her that you’re going to charge a fee for running the credit check. You have an option to charge an application fee. That would defer the cost of tenant screening to the applicant.
After obtaining the necessary information and approval from your tenant, look for a credit reporting agency in your area.
Working with Credit Reporting Agencies
Credit bureaus are responsible for preparing a credit report. There are three major credit bureaus in the market, which are:
You have to look for credit reporting agencies or companies that offer a tenant screening service. These agencies will then obtain the credit report from these bureaus for you.
Collecting Credit Check Fees
Credit reporting agencies don’t offer their services for free. Of course, you’ll have to pay them. Their fees depend on the number of reports you’re going to request.
You can ask your prospective tenant to pay the fee for the credit report landlord check.
While it’s legal in most states to collect credit check fees, the price has to be reasonable. Check with your local laws on regulations about credit check fees.
Again, make sure your tenant is informed of the amount and purpose of credit check fee. If you have a pool of applicants, run through their applications first. Choose your potential tenants then do a credit check.
Lastly, remember not to ask for a credit check fee from the tenant if you don’t use it for the stated purpose. That’s against the law.
Dealing with Poor Credit Report
Now you have the credit report of your prospective tenant in your hands. Upon looking, you see that your tenant has a poor credit score.
What do you do?
You have two options. First, you can reject your tenant. If you feel that his having a poor credit score will affect your business, then do not rent it to that tenant.
Second, you can accept the tenant. But you may charge a higher rent or require a co-signer as added surety against his poor credit history. In other words, your prospective tenant will have to compromise.
Legal Issues on Credit Report
If you decide to reject your prospective tenant, you have to take certain steps in doing it, according to the Fair Credit Reporting Act.
Provide the tenant with an Adverse Action letter within 7 to 10 days after rejecting the application. Explain the exact reasons why you declined the application.
Include the name and address of the agency that provided the credit report too. If your basis for rejecting him is in the credit report landlord check you ran, you have to state it.
Final Thoughts on Credit Report Landlord Checks
Property leasing is a great business to get into. But like any other business, it involves risks.
That’s why you have to look at your prospective tenant’s background to help you reduce risks.
A credit report is an important document that’ll help you in screening your applicants for a tenancy. In this blog post, I talked about important things you need to know in a credit report landlord check.
A credit report landlord check will yield you lots of information. Based on that information, it’ll be easier for you to decide whether to accept a prospective tenant or not.
Remember to secure an authorization letter from your prospective tenant before working with credit reporting agencies. Consider collecting credit check fees from your tenant and make sure to set a reasonable price.
Lastly, when it comes to dealing with a poor credit report, make sure to take certain steps accordingly.
For example, if you reject the applicant based on that report, you have to explain it to him clearly.
If you decide to accept him anyway, you should try to have security against his poor credit by charging a higher rental fee or asking for a co-signer.
That pretty much sums up all you need to know about running a credit report landlord check. If you have any questions, just leave them in the comment section below.
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