Running a credit check on a prospective tenant is a vital step in ensuring that you’re renting to someone who is financially responsible. A thorough credit check can help you avoid potential problems like missed rent payments or costly eviction proceedings. Here’s a streamlined guide on how to efficiently run a credit check on a tenant.
Navigating the tenant screening process involves several critical steps, such as the submission of a rental application, obtaining necessary permissions to analyze credit reports, and ensuring a transparent and fair evaluation of potential tenants.
Before you begin, you must obtain written permission from the tenant to run a credit check. This is not only a legal requirement but also a best practice to maintain transparency. Along with the permission, collect the following key information:
Ensure that this information is accurate, as discrepancies can delay the credit check process.
Selecting a reputable online tenant screening service can simplify the process. These services typically partner with major credit bureaus like Experian, Equifax, and TransUnion to provide comprehensive reports. Look for a service that offers:
Some services also include background checks, which can provide additional peace of mind.
Once you receive the credit report, focus on key areas that will indicate the tenant’s financial reliability:
Understanding the credit report is crucial. A good credit score doesn’t always tell the full story. Consider qualitative factors:
Not all applicants with low credit scores are unsuitable tenants. Some may have faced temporary setbacks but are otherwise reliable. In these cases, consider:
If you decide not to rent to a tenant based on their credit report, you are legally required to notify them with an adverse action notice. This notice must include the reason for the denial and information on how they can obtain a copy of their credit report.
You can order credit reports online from the credit bureau of your choice with immediate receipt of results.
In addition, the three leading credit reporting agencies now offer credit reports and tenant screening services, many of which provide a background check in addition to the primary credit check and credit score:
The cost typically ranges from $25 to $50, depending on whether you request only a credit report or additional background checks.
A tenant credit check typically takes just a few minutes to process once you have the necessary information. Most online services deliver results instantly.
Acceptable credit scores can vary, but many landlords look for a score of at least 620. However, consider other factors like payment history and debt levels in your decision.
No, running a credit check for rental purposes is considered a “soft inquiry” and does not affect the tenant’s credit score.
Real Estate Editor
Jana Freer is a Real Estate Editor with Legal Templates, where she creates and edits legal form descriptions and articles to help landlords and tenants better understand real estate processes. She.
