Do you always do a credit check?

Question

I have hired a management company to screen prospective tenants for my apartments. But I just found out that they do not do credit checks. They said they do criminal record background checks, income verification, evictions and collection accounts. Do you think this is sufficient criteria to approve a prospective tenant?

JD Martin · Answer

No way. Always, always, always do a credit check, and look at the report not just the score. If you look at their report, and see they are stacked to the gills in debt, you will have a pretty good idea that if/when they run short of money, who is going to be first to be stiffed in the procession of people looking for payment.

Income verification is just about worthless, because someone can lose their job tomorrow. If you have a high barrier to initial rental, you rarely have to worry about things like that. People who cannot manage their money properly will never come up with first+last+deposit, no matter how much money they are making.

We do credit check, background check, eviction check. Any record of eviction is automatic disqualification. Most felonies are as well, especially those of a violent or sexual nature. Low credit score, it depends on what's on their credit report, which is why you always look. We have had a number of tenants that were fantastic but had dings against them because of nothing more than medical collections. We usually don't hold that against them if everything else checks out good.

David D Painter · Answer

I probably shouldn't admit this but I have never done a credit check on a prospective tenant.  I end up with really good tenants.

Deano Vulcano · Answer

Thank you all for your great comments. I have decided to fire my present management company and hire a new one.  They do full-blown credit reports.

Peter Tverdov · Answer

The answer is...it depends. For a typical rental property in an A, B, C class area? Sure.

How am I supposed to run credit in a D class area on a guy who speaks no English but is otherwise a good prospect? Tell him to fill out a form which scares him off? No, stupid.

You have to finesse things based on your area.

Account Closed · Answer

I work with one property manager that does, and another that doesn't.

The one that doesn't sends me applicants and I approve based on what's listed in the application.  They also do a great job on following up with listed references and following up with the current employer.

Deano Vulcano · Answer

They actually mislead me. They told me that they do pull credit reports when in reality  it is only a small part of a larger comprehensive report. It will indicate their credit score, how many delinquent accounts, charge offs, and bankruptcy`s. But it does not say how much is owed on the delinquent or collection accounts. It doesn't show a history of how many times they were late. It doesn't show how many accounts they have. All in all it`s very limited information, certainly not enough for me to make an informed decision. That`s why they are bye bye.

Matt Nolan · Answer

I couldn't imagine placing a tenant in one of my units without running their credit first.  With that said, my properties are in A neighborhoods, and it affords me the opportunity to be extremely picky when placing my tenants.  I'm extremely critical of credit scores when it comes to applications, and I've turned down countless potential tenants as a result.  I've never had issues filling vacancies, and I've always ended up with tenants that were financially sound going into a lease.

I screen to the fullest to put me in the best position as a landlord.  It's not a perfect science of course, and there are bumps in the road, but it avoids inheriting a known problem.

As for a property manger not running a credit report, that seems crazy!  I would think that would be a big part of their provided service.  I'd be most concerned about finding out that they don't run credit checks after having hired the PM.  That seems like something that should have come up before enlisting their services.

Matt David · Answer

For what little my 2 cents counts, I don't bother with credit checks, but each his own.

I do my own due diligence, I pull court records - did they pay their speeding ticket, how much child support is required per month (Are there arrears?), what lead to a particular judgment being levied against the, et. al.  And I look at other factors, like does the application information supplied to me from them make sense?  Were they on time.  How do they present themselves.

You'll eventually find the system that works best for you, with the understanding that there's no such thing as a fool proof system.

Tamar Mar · Answer

Yes, we always run a credit report, but I also look at the total picture as well, especially the criminal record.  We screen tenants on the phone to prequalify before inviting them to the open houses for our SFH rentals, and meet all applicants before they apply.  Sometimes it's a gut check that can weed out better prospects.  Employment history is also heavily weighed.  I understand a person can lose their job tomorrow, but I like to see a history of solid employment - i.e. not switching jobs every few months, just as if I were hiring a new employee.

Rolanda Eldridge · Answer

@Deano Vulcano...Always, but I look at the total picture...

Do you always do a credit check?

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