“What Is The Value of Using The Three Credit Scores?” written by Mike Marko
What are the three credit scores?
As a property manager you have probably heard about this.
The three credit scores are scores that the 3 major credit bureaus (Transunion, Equifax, Experian) compile when evaluating someone’s credit.
What exactly do the three credit score reveal about an individual?
Normally a single credit score shows financial stability correlated with credit checks.
As property managers we are always looking for ways to make our jobs run smoother. Additionally we are always looking for better ways to evaluate tenants when we are renting properties. That’s why in this article I will show you the value and the need for having three credit scores on every person applying for a rental property.
Knowing The Three Credit Scores
The first step in renting to a tenant is getting them to fill out the applications and authorizations to do rental and credit background checks. When a property manager starts doing a credit check he or she will most likely encounter a credit score.
So what then are credit scores, and how can they help you in renting your properties?
What Is A Credit Score?
Credit scores can be obtained through any credit report sites. Any company that offers a credit check can give a credit score. These companies are most often connected to the 3 major credit bureaus that provide a person’s three credit scores.
Each of the 3 major credit bureaus will assign a score to a person when they have evaluated all their credit history. A credit score is a numerical value given to a person’s credit analysis. It helps to easily know a person’s creditworthiness. Credit scores consist of a three digit number. And it usually ranges from 300 up to 850.
The higher your credit score is, normally shows that you have minimal debt and pay all your bills on time. The higher a person’s credit score is usually serves as a key to knowing that a person has a healthy or risky financial status.
If a person has a high credit score then it signifies that this person has financial stability and will pay rents on time… making things easier for you as the property manager. Whereas a low credit score could mean the person will have trouble paying rents on time.
The Three Credit Scores
The three credit scores are credit scores compiled by the 3 major credit bureaus, Transunion, Equifax, Experian..
The 3 major credit bureaus are the major credit check bureaus who handle a person’s credit check. They are contracted with financial, banking and credit card companies, and keep and rate financial data on every person in the USA. So it’s important for a property manager to know how the 3 major credit bureaus that will provide the three credit scores of your tenant.
3-B: Equifax, Experian, and TransUnion
Equifax, Experian, and TransUnion, also know as the the 3-B, are the 3 Bureaus of all the credit reporting companies.
These 3 major credit bureaus will give you are the property manager the credit scores you can use. Each company has their own scoring system for scoring credit. However when you can get all three of the credit scores combined on one report this you have the range of information you need when evaluating tenants for rentals.
Three Credit Scores Of Each Bureau
The ranges for the credit scores of the three credit bureaus are:
Equifax – 280-850
Experian – 330-830
TransUnion – 300-850
High – Low-Risk Credit Scores
The credit scores of your tenant from the three credit bureaus will always range from 300 to 850.
If a credit score is only around 600 or below that from all three credit bureaus then this tenant is more likely to have a higher credit risk.
So what’s the score you should look for to minimize risk then?
From 650 and up to 699 a person’s credit score is considered to have a fair credit risk. When someone has 700 or higher on all three credit scores it means they have a good score. Having that higher credit score also means that your potential tenant has a low credit risk.
850 credit score is the highest possible rating given to an individual. This means that the person’s credit report states a stable and healthy financial status.
Your tenant’s three credit scores may be high-risk or low-risk to one of the three credit bureaus. Normally all three scores are different so knowing what criteria each of the bureaus used in assigning the credit score is helpful in evaluating a tenants application for rental.
Why Are The Three Credit Scores Different?
The three credit scores differ from one another… simply because of the differences in information gathered and the criteria used by the bureau to score the data or information.
Not all the three crediting bureaus share the same credit information of a person. Sometimes one or more of the bureaus has different sources for their information, so often the information differs from bureau to bureau. If they have the same information it is more likely that they acquired this information at different times and used different methods to score the information gathered.
The credit bureaus also differ a bit when it comes to calculating credit scores. Each of the bureau has their own equation to follow when they calculate credit scores. Each has set their values for evaluating information differently when they calculate credit scores. This then leads to some changes when it comes to the three credit scores..
Why Check The Three Credit Scores
It’s recommended that you check all three credit scores since the credit bureaus use different sources to collect information. They also use different scoring methods.
Getting the most complete and update credit information on a rental applicant takes using all three credit scores.
As a property manager if you only run a credit check from one of the three credit bureaus, then you’ll only know the credit information related to that score compiled by that bureau. This information could be incomplete and falsely score the tenants credit score either higher or lower than it really should reflect.
When you do a three credit score report using all of the 3 major credit bureaus information and scores then you can have a basis of comparison. You can then discuss with the tenant any discrepancies.
This then will help you give a comprehensive view of whether you will or won’t accept the tenant.
Final Thoughts On Knowing The Three Credit Scores
Utilizing the three credit scores from the 3 major credit bureaus allows you to evaluate the tenants application for rental completely from a credit point of view. Knowing that these three credit scores will be different from one another offers different complete insight into different ways the tenant’s credit information and reports were evaluated.
It is best for a property manager to check all three scores in order to fully give an acceptable decision when it comes to accepting or rejecting tenants.
Feel free to write below any questions or comments you have about the three credit bureaus.
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