How A Tenant Credit Check Works

“How A Tenant Credit Check Works” written by Mike Marko

Are you doing a tenant credit check right now?

A credit check is often part of a background check. Property managers need to do this type of check for potential tenants.

You may want to know how it works…

It’s not really that difficult but knowing how it works will help you and your business.

That’s why today I want to share with you some useful information about the tenant credit check and how it works.

Tenant Credit Check

As a property manager, it is only important to know how you can do a background check on any tenant applying to rent one of your properties. During the process of finding the most qualified tenant to rent to, it is always certain that when you run a background check you will also include a tenant credit check.

The information in a tenant credit check can help give you very useful insight into the potential tenant.  So with all that… let me take you through the process of how a tenant credit check works!

What Is A Tenant Credit Check?

It is important to know what tenant credit check is. This will help you further understand what it is for and how it can help you. A property manager must be knowledgeable enough about this type of background check because this will greatly help you in determining and accepting your potential tenants

A credit check analyzes a person’s financial condition. It is a source of information that helps identify the tenant’s financial stability.

Credit checks provide a credit history of a tenant. This will allow you to know if the tenant is financially capable to pay their bills as well as rent on time. A Tenant credit check will also help you determine if the tenant has a reliable financial status. Which means the tenant is responsible enough to pay all his dues like rents.

Ready For A Credit Check, What is Needed?

So now you have a tenant that you would like to rent your property to. Knowing what to ask for and getting authorizations to process is the next step to doing a tenant credit check.

Let’s go and move ahead!

You will now know what you as a property manager will need to have before running a credit check.

What Are Needed For A Tenant Credit Check?

  • The tenant’s authorization form. As the name details, this form gives a property manager an authorization to run a credit check on the tenant.
    Under the Fair Credit Reporting Act, a property manager must ask for the authorization form of the tenant before running a credit check. This form should be filled out by the tenant.
  • Application form of the tenant. At a minimum this form should include the following:
  • Full name of the tenant
  • Addresses of the tenant for the last two years
  • The tenant’s Social Security number
  • Date of birth of the tenant
  • The tenant’s current employer
  • The tenant’s current Landlord

When everything is good you can now start with your potential tenant credit check.

Process Of Running A Tenant Credit Check

Were you able to get all the information you need? If so… then you can now start running a tenant credit check! I have some steps that I will share with you. These can help you do your credit check better.

Here are some ways on how you can run a credit check.

  1. Hiring a company. Once you have all the needed information you can hire a company to do your tenant’s credit check. There is a fee involved that you can pass on to the tenant in form of an application fee.
  2. Using the 3-B. The 3-B is the 3 major credit bureaus that offer credit checks to its clients. Most of the companies that offer background and credit check report to the 3-B as well.  All you need is to sign up with the 3 credit bureaus if you haven’t yet. Then log in and start doing a credit check on their site. This process lets you do your tenant credit check on your own.

Inclusions Of A Tenant Credit Check

A tenant credit check is a tool used to gather information. This means there are things you need to know.

And these things are included in a credit check:

  1. Personal Information
    A tenant credit check requires the potential renter’s personal information. These are the basic details that you will easily find in a credit check.
    Here is a short list of what personal information is included.
  • Name of the tenant. Simply because if it is not included you won’t know who’s credit check it belongs to. And will also help you easily identify if the tenant is a fraud.
  • The address. This will help track if the tenant is really a resident of an area as well as helping you do a further background check on past rentals.
  1. Financial Information
    What is a tenant credit check if there is no financial information involved? It won’t help you or make sense at all without this information.
    So here are some details you will find that is included in a credit check.
    • The financial associates. This is a reference list where you will find details about the tenant’s connections with other people. Samples are joint mortgages and bank accounts.
    • Account information. Here you will see the tenant’s history of his bank accounts. Any missed payments or late payments can also be included. Old and existing accounts can also be found in the financial information of the credit check.
    • Revolving credit card history this will show you how the tenant has historically paid their bills on time and any late payments.
    • Any loans or assets that the tenant has entered into as well as their payment history on all of these type of items

Good or Bad?

Do you have your tenant credit check in hand? A property manager like you needs to know what the most important thing about a credit check is. This means… knowing whether your potential tenant has a good or a bad credit report.

A good credit report will have good information. This tells how your potential tenant is responsible enough to pay his dues on time. And you won’t need to worry about any late payments. The potential tenant may also have a high credit score that verifies all of his information. The score must be around 700 and above.

A bad credit report is just exactly the opposite of a good credit. Bad credit reports are most often tenant’s whose application will get rejected. The credit check will also have a low credit score that is around 500 or below.

I’m sure you noticed that there is a gap between a good credit report and a bad credit report… that’s the grey area where you have to use your best judgment about whether the tenant should be accepted.  That’s why conducting a thorough tenant background check is paramount to any property manager.

Last Thoughts About The Tenant Credit Check

As a property manager, you’ll have some tedious tasks when it comes to doing a tenant credit check. Even so, it’s still an important task that has to be done. Doing credit checks will help you make a better choice of who among your potential tenants.  

Knowing your potential tenant’s financial stability and capability will help you in your business.

I hope you were able to glean some new information about the tenant credit check through this blog post.




Suggested Articles:
1. What Is The Value of Using The Three Credit Scores?
2. 7 Key Points On How To Run A Criminal Background Check Online
3. Credit Check For A Prospective Tenant

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Article: How A Tenant Credit Check Works

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