As a landlord, you want to fill your properties with the best possible tenants. You want them to take care of the house or apartment, stick to the lease parameters, and of course, pay rent on time. To avoid charging late fees and chasing down payments, it’s important to screen potential tenants before accepting them. And what’s the best way to do this? A thorough credit check.
By checking a potential tenant’s credit report, you can ensure that they have a history of making payments on time and managing their finances properly. This guide will break down the basics of credit screenings and how you can perform them as a landlord.
Why does credit history matter when choosing renters?
Credit screenings are a way to verify multiple facts about the history of prospective tenants. You can verify their identity by cross-referencing their Social Security number, date of birth, and current address through the credit check. And of course, you’ll be able to take a look at their credit history. This includes the number of credit accounts under their name, loans, and their payment history. You’ll be able to see whether they make payments on time and if they have had any evictions or bankruptcies. If they have an impressive credit history, they may be more likely to pay their rent on time and sustain an income.
How can you check a potential tenant’s credit?
You have several options for checking a prospective tenant’s credit report. One of the most popular options is a credit screening service that includes a credit report. These companies will provide a credit check in addition to other information on an individual’s background. You can also purchase credit screenings through landlord associations. Many landlords will also run a check directly through a credit bureau.
When using any type of credit check service, you can expect to pay a fee. This is why some landlords will include a small charge when interested renters fill out a rental application.
What should you look for in a credit report?
Once you receive the results from the credit report, you should know what red flags to look for. These include frequent late payments on bills and loans, past evictions, and bankruptcy. The report will also show whether the tenant has a significant amount of debt. You should also look out for any financial crimes. The credit report will show the prospective tenant’s overall credit score, and you can decide how much stock to put in this number. Overall, use your judgement to decide if the applicant’s financial history shows reliability.
What other factors determine tenant reliability?
Remember that the credit check is only one portion of your overall screening of tenants. It’s also important to call their former landlords to confirm that the tenants made payments on time, maintained the property, and were respectful to neighbors. You should also ensure that they are actively employed and make enough income to pay rent. All of these details will come together to determine whether your potential tenants are reliable.
If you are ever in doubt about what you can legally screen for, be sure to consult a lawyer. They can ensure that you are in compliance with tenant-landlord laws in your state and are avoiding housing discrimination.
While finding the right tenants may be time-consuming, the effort certainly pays off. By providing a thorough rental application, running a credit check, and calling their references, you can predict their financial wellness. However, it’s also essential to talk to them in person. You want to ensure that you get along with your tenants and that they will respect your other renters. All of this diligence can lead to long-term tenants.