Being a landlord comes with many challenges and responsibilities. Still, your main goal is to successfully rent your property to a tenant that can pay you on time. One of the ways to ensure you’ll get your rent in time is to run a credit check on a tenant.
A full background check should confirm the information your potential tenant stated in their application. In addition, running a credit check helps improve your tenant screening process and find qualified renters. Here’s how to start.
Collect the Necessary Information
Running a credit check on a tenant requires that you obtain specific information you’ll use in the process. Start with the information on the tenant’s rental application:
- Legal name
- Date of birth
- Social security number
- Current landlord and address
- Current employer
Then, move on to getting the tenant’s permission.
Use an Online Service
When your potential tenant gives you access to their credit report, they must share personal information with you. That’s why it’s a good idea to use some property management software. This type of online service can help your tenant share the information safely.
In addition, online property management tools can verify that you’re the actual landlord of the property before you’re able to run a credit check.
Select a Credit Report Provider
There are three major credit report bureaus you’ll use in your tenant credit checks:
The good thing about these services is that they count as a so-called soft check, meaning they don’t affect your tenant’s credit score.
With Experian, your rental applicants can purchase a copy of their report and choose to grant access to one or more landlords. TransUnion and Equifax also provide similar services where landlords can pay to view the report or pass on the costs to the applicant. The fees range somewhere between $25 to $75, depending on the requested information.
Even though you live in a digital age, sometimes it takes two to 10 days to receive the requested information. However, some online services will provide the information within minutes once you’re confirmed as a landlord, and the applicant has finished the submission.
What to Look for in the Report?
All credit reports should contain:
- Applicant information
- Fraud indicators
- Financial summary
- Account summary
- Public records
- Credit inquiries
- Tenant credit score
Keep in mind that some indicators may show as poor, but that still doesn’t mean your tenant is not the right fit. For example, if they don’t have any credit history, they might be too young to build it, or they’ve recently moved to the country.
If the tenant has a poor credit score, there are additional steps to take before you make a decision. First, ask your tenant if they’re working on improving their score and check their previous rental payment history.
You can also call their previous landlord and check if they’re a reliable tenant. In addition, you can contact their employer and ask them to confirm their income and employment status; just get a tenant’s consent first.
Final Thoughts on Running a Credit Check on a Tenant
Renting your property is a great way of improving your financial status. However, you should be careful when selecting your tenant. Not only do you want a tenant who is trustworthy and responsible enough to take care and maintain your rental, you’ll also want one who can pay rent on time. Running a credit check on a tenant can help make that decision for you.
This is why background checks and credit scores exist. With your tenant’s permission, you can ensure that they’re financially capable of paying rent. Don’t avoid asking for a credit report; just follow the right steps to obtain it.