One of the common issues landlords and property managers face in screening potential renter is how to credit check a tenant. Knowing how to check the history of potential renters and their financial responsibility through credit checks is crucial in managing a property. If you want to know more about how to credit check a tenant, here are some tips to make things easier and hassle free for you and your future occupant.
Checking a Prospective Renter's Credit Report
Have the prospective tenant or tenants to fill-out written rental applications
Rental applications involve knowing how to check basic personal information of the applicant, from name, present address, contact number, social security number, driver's license number, addresses in the past couple of years and contact info of its landlords, and present and past employer info. This will make requesting your tenants for credit check a lot easier for you.
Contact previous landlords and check your applicant's payment record, and if he or she always paid the rent on time. Furthermore, ask for the applicant's credit character, and if he or she is trustworthy. You can also verify or check your potential tenant's bank information and employment status to ensure their ability to pay for rent and financial responsibility.
Get written permission from your potential tenant
The FCRA or Federal Fair Credit Reporting Act says you can only check the credit report if you have written permission from your applicant. Thus, include a letter in the application that you've been authorized to get a copy of his or her credit report and have it checked and signed with date by your potential occupant. Also, access to these documents is only limited to those who are specified by law, this means creditors, employers, landlords, etc. to whom a person submits an application. If applicant is a couple, as a creditor, you need to check both of their signatures for the application.
You as creditor can also charge the cost of the request to your prospective renter. Many property managers and landlords actually charge their applicant for the screening fee (cost of ordering a credit report) when they're checking for credit. The Landlord Association says that, collecting fees for the credit check of the applicant is a common practice. As a landlord, it is your responsibility to inform your applicant about this beforehand, and explain that fee is nonrefundable even if his or her application for the rental is declined.
Double-check the provided info
Creditors or landlords can verify an applicant by asking for a valid ID or a government ID with photo and have it photocopied for the application. Also, before you pay for your applicant's employment and financial info, check that all provided info is correct.
Get the credit report from any of the three major credit bureaus
Your three best options to check credit report are; Experian, Equifax, and TransUnion. Any of these three can help you on how to credit check a tenant effectively.
Credit report agencies can also provide you with additional info such as credit score and other background checks of your applicant for extra fees.
Inspecting the credit information
Look over, check, and review the credit report from collections, evictions, defaults, charge-offs, to bankruptcy and judgments written in the report. A report is usually divided into three categories, and these are the identifying details, credit history and public records and inquiries. Financial data are obviously in the credit history and public records.
Make sure you double-check the reports as they often include mistakes. Thus, if the report contains a lot of problems and negative marks, then let your applicant explain about it. Many times, honest debtors commit small mistakes and experience unfortunate problems, like a spouse or previous partner involved in debts using else's name. If you feel like your potential tenant is trustworthy, then let him or her explain the situation. This is how to credit check a tenant properly.
Explain negative decisions on paper
After you check credit history and you refuse to accept the tenant based on his or her bad credit report, then you must state it clearly and politely through a letter. Attach a reference to the federal law that permits someone, who declined credit, 60 days to get hold of a free credit report.
Contacting the employer of your applicant and asking how long he or she has been working there can greatly help you gauge his or her financial stability. Added tip on how to credit check a tenant: if your applicant has been with that company for more than two years, then ask for the employment status if it's temporary, regular, or permanent. Some employers may require written consent from your potential tenant before giving you any information, so it's good if you check with your applicant beforehand. When checking, you can also use a copy of a signed rental application as proof for your inquiry.
You can also ask your potential renter for his or her last three pay checks or recent Tax return to double check his or her income. Furthermore, avoid declining applicants based on their race, gender, or age, as it's inhumane and discriminatory. Make sure you checked and based your decision in an objective matter such as financial history. This is why many people fail at how to credit check a tenant objectively.