Why should you perform a tenant credit check? A tenant credit check could greatly reduce your risk against undesirable tenants. A landlord must be sure that their properties are occupied by tenants who are responsible. One way to screen tenants is to perform a credit check. A credit check can provide useful information, such as debt repayment issues, past addresses, the last place of employment, and if there are any judgments and liens. A landlord can use information from the report to calculate the tenant's debt-to-income ratio. You can also see if the tenant has any instances of social security number misuse or evictions.
Tenant credit checks can be obtained directly from the three major credit reporting agencies: Experian, TransUnion, and Equifax. Each of these companies charges a fee for a copy of a credit report. It is important to get reports from all three agencies, as the information contained therein could vary. Some creditors report to one agency and not the others. You could find harmful information on one report while the other reports show a good record. There also some companies that will obtain reports for you, which could prove to be useful to a landlord with numerous tenants. Those companies can provide tenant credit reports at a reduced rate in the form of a contract for a monthly fee, or at a reduced fee per report. Some companies even offer additional screening services, such as criminal background checks. The type of program will be determined by the volume of reports you will need to request on a regular basis. Since obtaining a tenant credit report can be expensive, some landlords opt to pass the cost on to the tenant.
Before you can use the credit report as a screening tool, a baseline must be established. You must determine the lowest credit score you would be willing to accept. You use those criteria to measure the tenant's credit report against. This will eliminate any claims of housing discrimination against you if you deny a tenant to rent the property. Credit reports do not necessarily reflect the whole financial picture of a tenant. Negative information could be the result of medical emergencies, job loss, or some other unfortunate circumstance, so it is wise to also contact former landlords, employers, and other sources.