Credit checks are handy screening tools that provide landlords with more insight into the tenant’s financial history and responsibility. What does a landlord look for in a credit check? Should tenants have a certain credit score or history to find a place? Let’s find out.

 

Why are Credit Checks Important?

Credit checks are an important part of the tenant screening process. It can provide landlords with an in-depth understanding of the tenant’s financial health. Credit checks can tell the landlord whether the tenant has been responsible for past payments. Eviction histories can also uncover whether the tenant will give the landlord problems later on. Past behavior often predicts future outcomes, after all. While landlords can evict delinquent tenants, the process is often long and tedious.

 

What Does a Landlord Look for in a Credit Check?

Landlords often screen potential tenants before they rent out property. Evictions are costly, after all, and can run a landlord thousands of dollars in eviction fees. One of the most common things landlords consider is the tenant’s credit score and history. What do landlords look for in a credit report? Here are some of the most common things they keep an eye out for.

 

1. Low Credit Score

What credit score do landlords look for? In truth, there is no set credit score landlords look for. While high credit scores are preferable for most landlords, tenants do not need an unreasonably high score just to rent a property. However, what they might need to think about is whether or not their credit score is too low.

This does not mean a low credit score will immediately disqualify a tenant. It doesn’t offer a holistic perspective of the tenant’s financial history or status. Responsible landlords will look at the credit report as a whole and determine why the score is low before deciding. Nevertheless, low credit scores can raise concerns and lower a tenant’s chances.

 

2. Late Payments

A tenant credit check might include checking whether or not a tenant has made any late payments. If the tenant consistently pays credit on time, then landlords don’t have to worry as much about future payments. However, if there’s any indication that the tenant has repeatedly paid credit cards, utility bills, and loans late, then landlords might be more wary.

 

3. Large Debt

A tenant credit report might indicate how much debt a tenant has. If the debts are too high, landlords may reconsider their options. Debts might hinder the tenant’s ability to pay rent every month, resulting in late or delinquent payments.

However, landlords may be more understanding depending on the type of debt someone has. For instance, student loans are pretty common among the entire population. It’s not necessarily considered irresponsible. Meanwhile, someone might be less trustworthy if it involves excessive credit card debt.

 

4. Gaps in Payment

A credit check for landlords might show 7-10 years of a tenant’s history. Landlords should look for lapses in payments on credit cards or other loans. More consistent tenants are more favorable.

 

5. Derogatory Marks

Derogatory marks include accounts in collection, bankruptcies, car repossessions, and credit card charge-offs. Landlords may consider these red flags in a tenant’s credit report as they may show financial irresponsibility.

 

6. Past Rental Delinquencies

Landlords often check rental histories when checking the rental history report. What does a landlord look for in a credit check? One of the biggest ones is past rental delinquencies. If a prospective tenant owes an outstanding debt to a previous landlord, it can be a red flag.

This usually happens when a previous landlord reports a tenant to a credit bureau. It appears on their credit report and serves as a warning for other landlords. Landlords can then call the references in the rental history report to ask about the potential tenant’s history.

 

How do Landlords Look up Rental History?

There are multiple ways landlords can look up someone’s rental history. Here are the most common methods.

 

1. Ask the Renter for a Copy

The simplest way is to ask the potential tenant for a copy of their credit report. Tenants are entitled to free annual credit reports from three credit reporting agencies. It’s straightforward and eliminates unnecessary fees. However, some tenants may fabricate their report to make it more favorable for them. Some tenants may also provide an outdated copy of their credit report to mask recent delinquencies or derogatory marks.

 

2. Get the Report from a Credit Agency

Landlords can request a credit report from a credit agency. This is a more time-consuming and tedious task, and it’s often only a good option if the landlord has multiple rental properties. Follow all the relevant credit report-related laws and ask a lawyer before proceeding.

Getting the report from a credit agency may require the landlord to undergo an identity check, business background check, and property inspection. This process can be taxing for individual property owners. For this reason, only rental property companies and landlords with a large portfolio go through it.

 

3. Use a Third-Party Platform

Landlords can use third-party platforms to run credit checks. Many can look through online databases to find the tenant’s potential criminal history. Some may even provide in-depth information about the tenant’s debt levels, financial history, eviction history, and ability to pay rent.

 

4. Opt for Tenant Screening Services

Some organizations and rental property management companies offer tenant screening services to landlords. This way, landlords no longer need to do the legwork of looking through databases or reviewing reports. It’s quick, efficient, and convenient. Moreover, it’s usually cost-effective as it reduces the time it takes to review a potential renter’s history, speeding up the time it takes to choose a renter.

 

Choose Wisely

What do landlords look for in a credit check? There are many factors to consider when checking a potential tenant’s credit and financial history. Nevertheless, while it’s time-consuming, it always pays to be careful and choose wisely.

Do you need a rental property management company? Look for one today through our online directory!

 

RELATED ARTICLES:

• Can Tenants Get The Boot When Smoking In Apartments?
• Fair Housing Violations Landlords Should Steer Clear Of
• Rental Property Maintenance Guide For Landlords

Tenant screening is one of the most important parts of the renter application process. Landlords should carefully vet potential tenants to avoid future headaches.

 

A Landlord’s Guide to Tenant Screening

It is not uncommon for a landlord to come across a bad tenant or two in their lifetime. Bad tenants don’t pay their rent on time (or at all), exhibit no care whatsoever for the rental property, and even sometimes purposely damage the unit. Fortunately, landlords can significantly lower the risk of renting to bad tenants by adopting a careful screening process. While tenant screening services do exist, it is imperative that landlords also know how to do it themselves.

Here are the things every landlord should check before renting out to a tenant:

 

1. Income/Employment

As a landlord, you obviously want a tenant who has the ability to pay rent. In general, it is a good idea to look for a tenant whose monthly income is at least three times the rental rate.

If a tenant doesn’t earn enough money to cover the cost of your rental rate, then they shouldn’t be considered as a viable applicant. As such, you must perform an employment or income check. Asking for a pay stub is a good way to do it. It is also a good idea to contact the tenant’s employer to verify that the information provided is accurate.

 

2. Tenant Credit Check

Checking an applicant’s income might tell you they have the means, but it won’t tell you that they will pay on time. A good way to verify an applicant’s willingness to pay is to do a credit history check.

A high credit score means that an applicant has a proven track record of paying their debts on time. In that respect, it makes sense to conclude that they will likely pay rent on time, too.

 

3. Background Check

Some tenants have a criminal history, and it is up to you to determine whether or not that should influence your decision. For instance, if an applicant has been arrested for selling illegal substances in the past, they may do it again — this time, on your property. On the other hand, some criminal records are not as much of a deal-breaker.

To verify a tenant’s criminal record, a tenant screening background check is necessary. This minimizes the likelihood of a costly eviction later on. Just remember to evaluate each one individually instead of making a blanket judgment.

 

4. Past Landlords

Much like you would contact an applicant’s employer, it is important to get in touch with past landlords. This way, you can ask them questions and get a general feel of how they are as a tenant. Here are some of the best questions to ask previous landlords:

• Can you confirm that said applicant was your tenant in the past?
• Did said applicant pay their rent on time?
• Did said applicant damage the property in any way?
• Was said applicant a nuisance to their neighbors?
• Did said applicant break any lease terms during their tenancy?
• Did said applicant leave the unit in good condition when they moved out?

 

5. Past Evictions

Every tenant screening form should have a section for past evictions. A tenant with a history of being evicted tells you that they have a knack for breaking the terms of their lease. As such, it is likely that you will need to evict them at some point during their tenancy as well. Keep in mind that evictions tend to be a costly and lengthy process, so you don’t want to go through it if you can help it.

 

Tips for Choosing the Right Tenants

If you’ve never done it before, tenant screening can seem like an uphill battle. But, you can make it infinitely easier by following the tips below.

 

1. Be Clear in Your Ad

It is important to set your requirements and expectations right from the get-go. Your ad listing should indicate what kind of tenants you’re looking for and what you don’t want in a tenant. This acts as a pre-screening method.

For example, if you don’t allow pets on your property, your ad should clearly reflect that. That way, nobody’s time is wasted. Your ad should also list down any non-negotiables, such as smoking within the unit, the lack of parking spaces, or past evictions.

Don’t forget to take Fair Housing laws into account, though. A lot of tenants sue potential landlords on the basis of discrimination. The federal Fair Housing Act, as well as state-level Fair Housing laws, apply to landlords and the tenant screening process. Make sure to treat all applicants fairly and equally.

 

2. Use a Standardized Application Form

It is best to come up with a standard tenant screening application that every potential renter should complete. This way, you can evaluate and compare tenants using the same barometers. This also helps landlords remain in compliance with Fair Housing laws.

Your application form should, at the very least, ask for information on the following subjects:

• Employment history
• Current and past landlords
• Prior evictions
• References

You should also require prospective tenants to sign the application form. After that, make sure to give a copy to your tenant and keep one for yourself. This will prove helpful in the future in the event of a dispute.

 

3. Ask Questions

It is usually hard to get to know a person through an application form alone. You need to meet with prospective tenants and ask them questions in person. A good time to do this is during property showings.

You might find it awkward or uncomfortable to ask certain questions, such as how much they earn and why they want to move. But, asking these questions early on will help you determine whether or not the applicant is a good fit. It can also prevent future problems.

 

4. Hire Tenant Screening Services

If tenant screening is not something you see yourself doing on your own, hire a renters screening service. Many companies and websites provide screening services. Their services typically include the works, such as a tenant credit and background check, employment check, and a past eviction check.

When selecting a screening service, it is important to look at reviews. You want a company that actually does its job right and provides accurate information. The best tenant screening services will also provide landlords with a tenant screening report consisting of all the details they need.

 

Tenant Screening Checklist: Questions to Ask

Don’t know what to ask applicants during their interview? These are the tenant screening questions every checklist should have:

• Are you currently renting? If so, where?
• How long have you been renting your current home?
• Why are you moving?
• Have you informed your current landlord of your intention to move?
• When do you plan to move in?
• How long do you plan to stay?
• Will you be living alone? If not, how many people will be living with you?
• What line of work are you in?
• How much is your estimated monthly income?
• Have you ever filed for bankruptcy? If so, how recent?
• Do you or any of your roommates smoke?
• Do you have any pets? If so, how many and what kind?
• Will you need a parking space? If so, how many?
• Have you ever been convicted of a crime?
• Have you ever been evicted?
• Will you be able to pay a lease application fee of $X if you decide to apply for this apartment?
• Can you pay the security deposit of $X upon signing the lease?
• Do you have any questions for me?

 

Property Management Made Easy

Tenant screening is often a time-consuming and arduous process. It requires a lot of research and involves a good amount of social interaction. While many landlords can do it themselves, some just don’t have enough time for the job. This is where a property management company comes in.

Many property management companies offer tenant screening and selection services. Find the best management company in your area today with the help of Rental Choice’s online directory.

 

RELATED ARTICLES:

• 15 Key Questions To Ask A Landlord Before Renting
• Pets In Rental Properties: The Good And The Bad
• Late Rent: Creating Late Rent Notices And Assessing Fees