A credit check should be conducted before leasing to any and all prospective tenants. But once you have the report in hand, what should you be looking for? What’s a ‘warning flag’ and what’s ok? Here are some tips for dealing with a credit report:
- Not all credit reports are the same. Make sure you look at reports from all 3 credit-reporting agencies: Experian, TransUnion and Equifax.
- Double check that all information on the report is consistent with the information on the application. Inconsistencies can be a red flag.
- Compare information from a report to information you receive from other sources, such as references and previous living situations.
- The scores you see give the most weight to: a history of accounts going over 90 days late (vs. only one or two going late), current delinquencies, and multiple credit balances at or near maximum.
- Most important to evaluate are the sections showing collection and credit account information. Look for patterns. For example, one account assigned to collections while all others are paid on time – this could signify one large expense (such as medical), does not necessarily reflect badly on the applicant. Also look for revolving charges matching the locations of clients previous addresses.
- If there is a discrepancy that you would like to learn more about with a prospective tenant, a landlord is allowed to discuss the nature of the problem and give the tenant a chance to discuss or explain – however, a landlord may not give a copy of the report to a tenant.
- There are companies that will evaluate a credit report for you, such as Beacon or Fair, Isaac – either by making a decision themselves as to whether a client is qualified, or by providing you with an easier to understand rating system.
Taking the time to read and interpret a credit report can provide you with valuable information on a prospective tenant and is an important part of the screening process. It greatly helps the ability to predict the likelihood of a tenant living up to rental and tenancy obligations.