10 Jun Need a Credit Check On A Tenant?
When renting out a property, the vetting process is crucial to selecting the right candidate. You need to be sure that the tenant will take care of your property, pay on time, and most importantly, are good people. An integral part of the screening process is conducting a credit check. It’s a great indicator of the sort of person you’ll be renting to, as it contains their payment history, how much debt they’re in, and whether they have a stable renting history.
This Credit Boost post serves as a thorough guide to conducting and interpreting credit checks on potential tenants– the ethical considerations, why you should look into it, what to look for, and other aspects you should have a look at when assessing candidacy.
Are Credit Checks On Tenants Ethical?
Yes, so long as you have their written consent. The FCRA (Fair Credit Reporting Act) to get written permission before pulling a credit report.
Why Check Tenants’ Credit?
Credit reports are a great predictor of responsible renting behaviour and what to expect from them when payday rolls around. For instance, if they have a history of late payments– or even defaults– it’s unlikely that they’ll pay you on time.
What to Look for in a Tenant’s Credit Report
When reviewing tenants’ credit reports, it’s important to watch for these red flags.
Low Credit Score
Contrary to popular belief, a low credit score shouldn’t automatically rule out a tenant. Many factors determine creditworthiness, like payment history, loan performance, and recorded addresses. Tip: too many past addresses probably means that they’re an unstable tenant.
Late Payments
Late payments are a major red flag. If they pay back their creditors late, it’s quite likely they’ll pay you, too. Many landlords use tenants to pay off their bonds– so when the tenant pays late, the landlord (you) may have to absorb the cost, which could upset your budget and cause unnecessary anxiety. Rather be in the clear and rent to someone with a clean payment history.
Significant Debt
Most of us have been in debt before, it’s understandable. However, huge amounts of debt could mean that a tenant may struggle to pay rent on time–or at all– for some months, especially if their lender is putting pressure on them to pay up.
It’s also worth looking out for bad marks, like judgments, debt review, collections, repossession, and bankruptcy. These usually indicate financial irresponsibility.
Ask your tenant to use our free online credit checker and send you a copy of their credit report. All they need is their ID and phone number, and they’ll have the report ready and waiting within minutes.