Credit Checks and Tenant Screening

When you find tenants to occupy your rental property, you want to make sure you know about their background and have a great likelihood of being stellar tenants who pay the rent on time. The difference between a good tenant and a deadbeat may turn up with the information you receive with you run a credit check on a tenant applicant.

You can use any of the service agencies out there and pay a fee per tenant, usually 29.99 or more for the first tenant and 19.99 for additional tenants on a lease.  Or you can run the credit check yourself. 

The three credit bureaus offer a tenant screening process for landlords. Experian does not charge for the service. TransUnion charges $30 for a credit report, criminal background check, and credit recommendation.

Independent landlords must access Equifax credit reports through the National Association of Independent Landlords.  A comprehensive credit report costs $15.95 and full criminal background checks cost 29.95.

You can also use a service that pulls reports from all three credit bureaus at once. There are several online agencies that will do this for landlords.

Before you run a credit check, you will want to take these steps to prepare:

1. Get a complete rental application and permission to run a credit check from each tenant 18 years or older. Have a form on hand that each tenant completes with their full name, birth date, Social Security number, previous address, and landlord contact information for the previous two years. The form should also include a statement that you will run a credit check and a line for the tenant to sign acknowledging their permission for you to do so.
2. Collect a fee for the credit check from potential tenants. This covers the fee you pay for requesting the credit report from credit check websites or the 3 bureaus.

After you have the credit report, review it for red flags:

On the first page of the credit report, review negative or potentially negative items. These are accounts that are past due, charge offs, or collections.

Next, look for eviction, bankruptcy or forclosure. These are also found in the negative items section. 

Finally, review the section of individual accounts and loans.  You can see if the account is current and if there is a history of late payments.  You can also see if the payments are 30, 60 or 90 days late.

Not every tenant with derogatory marks on a credit report is a bad tenant.  They may have had a bad time, a job loss, and then regained their income and are rebuilding their lives.  You will likely want to take a hard look at any one with an eviction or foreclosure in their past, and determine if you want to take that risk.

It’s always a good idea to follow up with previous landlords and find out more about the tenant’s history of payment, length of time occupying the property, and their monthly rent.

By Daisy Hammond