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The average credit score in the U.S. is 714, according to Experian, one of the top data collection agencies. Landlords use a credit check to receive a credit report about a prospective tenant. When you run a credit check, it gives you a credit history and tells you about evictions and financial habits.
Landlords must know how to run a credit check on a prospective tenant. You achieve this by collecting information, running the credit report, and then analyzing the credit report.
Here's more on the ins and outs of how to run a credit check on a tenant.
Collect Information
You must collect several pieces of information when you do a tenant credit check. This information includes verifying their current address using a recent utility bill and valid identification, such as a passport or driver's license.
To run a credit check as a landlord, you also must provide information to the credit reporting agency. You must prove that you own the property by providing a deed or a purchase agreement.
Running a credit report will cost you money. You can determine if you want to pay the fee or pass that along to the prospective tenant.
Run the Credit Report
Several credit check companies will run a tenant credit check. A quick online search will give you a complete list.
However, it's essential to do your due diligence to ensure they are legitimate. The tenant credit check process begins with entering the Social Social Number of the prospective tenant.
A full credit report happens in a matter of seconds.
Analyze the Information
Things to look for in a credit report include bankruptcies, late payments, charge-offs, and evictions.
You'll also learn if the prospective tenant has a sizeable debt-to-income ratio. This figure indicates the percentage of debt they have as it compares to their income. A higher debt-to-income may mean trouble making a monthly rent payment.
Using this information will help you determine renting to the prospective tenant.
Tips
You must run a credit report on every prospective tenant - not just the ones you like. Screen everyone so you can't be accused of discrimination. Always follow the Fair Credit Reporting Act.
Keep all paperwork.
Know the difference between a background check and a credit report. A background report will give you a criminal history.
How To Run Credit Check on a Tenant
How to run a credit check on a tenant includes collecting information, running the credit report, and then analyzing the credit report. In addition, there are a few other tips, like avoiding discrimination and keeping all paperwork to make things go smoothly.
In Cleveland, Ohio, we are the best property management team to screen tenants for your properties. We follow the necessary rules and regulations to get the most qualified renters. Allow us to show you how we can care for your investment today!
