What to Look for in a Prospective Tenant’s Credit Report

As a landlord, it is your duty to check a prospective tenant’s credit report. By doing so you are protecting your property investment and ensuring that you have a financially responsible tenant leasing your space. Though a credit check is important, you need to know specifically what to look for and what constitutes a red flag to avoid a potentially harmful future tenant.

 

Four Main Parts to a Credit Check

When you run a credit check on a prospective tenant you will find:

 

  • Their identifying information (i.e. Social Security number, birthdate, etc.)
  • A list of their past and current credit accounts
  • Any public records that have been issued in their name (i.e. bankruptcies, tax liens etc.)
  • Any credit inquiries made

 

Most credit checks will include the prospective tenant’s current credit or FICO score.

 

What to Look for

In this mess of information it is your job to look for financial red flags that tell you if a tenant is worthy of renting your property and the likelihood they will pay their rental payments on time – if at all. Some common red flags you should be on the lookout for include:

 

  • Multiple instances of past due accounts
  • Multiple instances of maxed out or close to being maxed out credit accounts
  • Multiple credit inquiries in the past six months
  • Instances of public records and how old they are
  • Instances of collection accounts and their status

 

Just because a tenant has a poor credit history or low credit score does not instantly mean they are a bad tenant. Some individuals are working to rebuild their credit history and have established positive history for one to two years on top of their negative information. Therefore, look into how old negative information is as well as payments or “satisfied” statements showing the consumer has worked to pay off their debts. 

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