landlord look for in a credit check

What Does A Landlord Look For In A Credit Check?

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.

 

Tenant Screening Services4. 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!

 

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