Tenant Credit Check Basics

By E-Renter Tenant Screening
Posted on December 7, 2010 under Tenant Credit Checks, Tenant Screening & Background Checks | Be the First to Comment

Why Pre-Screen Tenant Applicants?
There are several advantages to screening tenants prior to signing a lease. One is that you can avoid discrimination issues by applying the same approval standards to every lease applicant—including a standard background and credit check. Another advantage is the reduction of risk. Why take a chance on a tenant who could have a history of evictions or an income that cannot support the rent? Mitigate risk by conducting a thorough credit check on every tenant.

What Will I Learn From a Tenant Credit Check?
You can learn at a glance if your prospective tenant pays credit card bills and loans promptly, as well as if there are any outstanding judgments against him or her. Previous bankruptcies are also typically reported. or bankruptcy filings. You can determine the minimum level of approval for your applicants, based on a good record of responsible finances and living within their means.

Be sure to compare the report’s list of an applicant’s previous addresses with those provided on the lease application. Are there inconsistencies? If so, the tenant is hiding something, or there is a legitimate explanation. Either way, you need to know before you sign a lease.

The information you gather from a tenant credit report must be held in strictest confidence, and never shared with third parties. Your applicant may have a right to the report—check your state’s guidelines and the Fair Credit Reporting Act (FCRA) to be sure you are compliant. If you reject an applicant for credit reasons, you must advise them in writing. Your best and easiest way to screen tenants is through a reputable, professional tenant screening service.

Consistency Counts When Screening Tenants
It’s important to be consistent when it comes to pre-screening tenants.

• Screen all lease applicants, no matter how they look, dress, or what kind of car they drive.
• Use the same screening procedures for each prospective tenant. Exceptions could be interpreted as favoritism toward or discrimination against a certain group.
• Establish a clear policy of background checks on all applicants to protect your rental property business.

Remember! Use a screening service with nationwide coverage and access to all three credit bureaus.