Renter payment problems are ranked as the primary concern for about 84% of landlords. A considerable percentage is caused by the failure to conduct adequate research on the renter’s job stability and ability to pay rent quickly.
So, to be safe and sure that your prospective tenant is stable and capable of paying rent, it is a good idea to run a credit check before allowing them into your property.
Here are the steps for running a legal credit check, what to look for, and why it’s essential to do it:
Why Should You Run A Credit History Check?
Running a credit check allows you to get a deeper understanding or insight into your prospective tenant’s financial history and habits. You get to know how stable and able they can pay rent or even afford your property.
For instance, if the tenant has a good credit history with high job stability, then the chances are high they will pay their rent on time. However, choppy payment history could be reflected in their future behavior. In that case, find more information about the client before making a leasing decision.
What To Look for in a Prospective Tenant’s Credit History
A credit report contains valuable information essential for making well-informed decisions to lease your property. For instance, you’ll find out;
- If a person has ever been convicted of a crime or arrested
- One’s job stability or consistent income amount
- If one has been filed for bankruptcies or when there are blemishes on their credit history
- When one has pending legal issues or lawsuits like a personal injury claim
- If an individual has late or delinquent payments like car or student loans
Based on the applicant’s rental outcomes, you’ll also learn about the prospective tenant’s credit history through a credit score. Consider those with medium or high scores that indicate high-quality applicants with less risk.
What Information Do You Need For Credit Check?
Apart from providing insight into your tenant’s payment patterns, credit history also helps you verify the applicant’s identity. You can easily find their names, addresses, taxpayer, and social security numbers.
You can get all these details from a completed rental application form. However, ensure to acquire written permission allowing you to conduct the check.
Tips on How to Do a Credit Check
You may have several applicants at one given time, and doing a credit check for all of them might prove a challenging task. Use these steps to run a credit check for only applicants who meet your standard qualifications.
- Use the rental application form to counter-check the applicant’s details, including their names, addresses, and social security numbers.
- Obtain written permission from your tenant to do a credit check
- Collect any payments needed for the screening processes
- Certify to your chosen credit bureau that you own a rental property
- Finally, run or conduct the credit history check. You’ll instantly get the result
How Do You Get the Tenant’s Credit Score?
Simple, you can automatically get the scores from the credit report. But if the applicant has low results and you reject them, then provide the tenants with the name, address, and contact information of the credit bureau that reported the adverse effects. This is a requirement by the Federal Fair Credit Reporting Act.
You can protect your property by getting the correct information about your prospective tenants. Download our free rental lease agreement form to help you gather all information you need.