A Guide to a Landlord Credit Check

A Guide to a Landlord Credit Check - Landlord, Credit check, Rental

Are you looking for a checklist for doing a landlord credit check?

The landlord credit check is an inescapable task if you’re running a rental business. It lets you figure out certain key points, such as whether or not a prospective renter is dependable.

The landlord credit check is therefore part of the tenant screening process. In other words, it’s among the steps you can take to ensure that a tenant applicant is one worth renting to.

The landlord credit check is a fairly simple process. The problem is, a lot of people don’t know how to do it because they’re uncertain of what they’re checking or how to do it.

You won’t have to worry about that anymore if you’re one of those people, though.

In this article, I will provide you with a checklist for how to do a landlord credit check. This will enlighten you with some ideas on how you can manage your own property.

How to Do a Landlord Credit Check 

Most landlords make a landlord credit check a requirement for rental. 

But to use the landlord credit check properly, you should know how to interpret a credit report. 

You need to know a lot of other things, including how to order a credit check and what other ways to check a tenant’s financials.

Let’s go over those things below. By the time we’re done, you should have a better understanding of how to do a landlord credit check for your prospective tenants.


Ordering a Landlord Credit Check

The landlord credit check is typically done by requesting the credit report of a tenancy applicant. 

That sounds straightforward, but you can’t actually do it willy-nilly for prospective tenants. There’s a process to go through.

The first thing to remember about ordering a landlord credit check is that it involves bringing up someone’s credit report. That’s technically sensitive information.

So if you want to commandeer someone’s credit records, you need to observe the usual rules on consent. In other words, you need to ask for the person’s permission first.

Landlords usually inform tenancy applicants of this when they apply to them. The safest way to do it is to ask the applicant to sign a document granting permission for the landlord credit check.

Clarify in that document that the tenant is allowing you to use his identifying information to request his credit report from a credit bureau. 

This is a requirement in several states if you’re trying to get someone’s credit records. 

Where to Get the Credit Check Done

After you get the go-ahead from the applicant, you can request his credit report from any of the major credit reporting bureaus.

Take note that you don’t have to stick to those, though. There are background checking companies that can help you do a more thorough landlord credit check.

For example, there are companies that will pair the credit report with a history of the applicant’s employment. Some will even include data on the applicant’s educational background.

Of course, there are caveats to getting a landlord credit check this detailed. For one thing, it typically costs much more than a simple credit report request.

It all depends on your requirements and preferences as the landlord. If you want to be ultra-meticulous about your tenants, go ahead and get a more thorough landlord credit check done.

Note that some landlords also compel their tenant applicants to pay for the landlord credit check, by the way. This isn’t always popular, though. 

Furthermore, it’s usually possible only in cases where you’re requesting a basic credit check, instead of a thorough background check.


What You’ll Find in a Credit Report

Once you get your hands on the applicant’s credit report, you’ll have a wealth of data to use in assessing him. 

Basically, a credit report is a person’s financial history. It tells you how the person has managed his finances thus far in his life.

Among other things, you can use a credit report to find out if the tenant has experienced debt problems in the past. If yes, then it is more likely that the tenant will have the same experience in the near future. 

Obviously, that’s not good for your purposes. A tenant with a history of debt issues is likely to continue that history by failing to pay rent on time.

Other things unveiled by the landlord credit check tell you how they’ll act as tenants. In case they have had a lot of late payments for bills, it could indicate they might also pay rent late.

If that is the case, you should contact the previous landlords of the tenant. This way, you’ll be able to know the tenant’s rental payment history before renting or not renting to them.

Look out too for past evictions in a credit report. Sometimes, these are included in the public record and are indications you should pass over a tenant applicant.


Other Records to Check

As I said earlier, you can go further than the credit report if you want to do a really thorough landlord credit check. I’ve already mentioned background checking companies that offer services for this.

If you want to do it yourself, it’s also possible, albeit a bit more effort-intensive. You can start by asking for proof of the applicant’s source of income.


Pay/Employment Records

A landlord needs to know the source of income of the applicant to check whether the applicant is capable of paying or not. 

Obviously, a stable source of income is desirable in a tenant applicant.

So how do you figure out if a tenant has a steady source of income? You can verify a source of income with pay stubs to avoid renting to someone who has an illegal form of income. 

You may also ask for banking records, employment verifications, and anything else to verify a tenant’s income.


Criminal Records

In addition to that, I advise checking each applicant’s criminal records. 

Are they spotless? Have they a history of repeat offenses?

Naturally, you want to rent to people who don’t have a criminal background. They’re generally less likely to commit offenses while renting your property.


Look out in particular for people who have had a history of illegal businesses in their records. I already mentioned it earlier, but you don’t want to rent to those with criminal sources of income.

That’s because there’s always a possibility that they’ll operate that criminal business from your premises. You don’t want to become an inadvertent party to some criminal operation.

What a Landlord Credit Can’t Check Tell You

You probably have a good sense of the value of the landlord credit check now. It’s clear that it can do a lot for a property manager or owner.

But I’m obliged to tell you that it’s still not perfect. Even a more extensive landlord credit check can’t tell you everything about a potential tenant.

For instance, it can’t tell you what a potential tenant’s personality is like. You might get a hint of it from certain records unearthed by the landlord credit check, but it’s rarely enough to truly get a picture of the person.

It also can’t guarantee a perfect tenancy. Even if a person has never had a spot of debt, for example, there’s little to prevent them from getting into it later on.

That said, a landlord credit check can still tilt the odds in your favor. In this case, it helps you “bet” on the best prospects for your tenancies. 

Final Thoughts on the Landlord Credit Check

In this article, we talked about the landlord credit check. 

Landlords do a credit check to find out if tenancy applicants are worth renting to. The landlord credit check is a way of protecting the property from being rented to undisciplined tenants.

However, getting a landlord credit check is only possible if you have the permission of the tenant. In many states, it may even be illegal to do a landlord credit check without that.

Once that’s acquired, it’s possible to get an applicant’s credit report and review it for red flags like evictions or bad debt. It’s also possible to go over other background records, like employment and criminal history.

All that being said, a landlord credit check can’t reveal everything about the potential tenant. What it can do is give you some clues as to the person’s dependability as a renter.

Anyway, that’s all you need to know about doing a landlord credit check. If you want to learn more about getting a landlord credit check, leave me a comment below.

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Article: A Guide to a Landlord Credit Check

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