Posted over 7 years ago

What A Credit Report Says About A Tenant

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As a part of rental property management, when you want to be sure you have a good candidate for a successful tenant, one of the best screening tools available is the credit report. Although there are many valuable components to the credit report, the credit score is one of the best indicators of reliability in the prospective tenant. Here are a few useful things you’ll find on the credit report.

Addresses Held In The Past

A prospective tenant who has lived in too many places in the last five years, combined with a low credit score, could be an indicator of a high risk prospect. Combined with a high score, many addresses may simply mean job transfers; however, you’ll want to cross check these addresses with the ones supplied on the application to ensure honesty. If an address was omitted, this may raise a red flag.

Debts Gone To Collections

There are many instances where a debt may go to collections: a bill dispute, late payments or large outstanding medical bills. Things that should warn you of a problem in being able to meet obligations are collections from any of these: apartment management companies, landlords, rental property management groups, utility companies and cell phone companies.

Credit History

The credit history is the meat of the report. It includes balances of debts owed, account history and payment history, as well as any student loans. For any outstanding current balances, check to see what the monthly payments add up to versus the income listed on the application. Avoid spending time reviewing old closed accounts with no balance; look at current payment activity only.

Bad Accounts/Good Accounts

Keeping in mind the age of your prospective tenant, their credit report may reflect more accounts because they’ve had credit for a longer time period. If the tenant doesn’t have a lengthy history and has only a few accounts, it should be easy to keep them in good standing. For a person with a longer history, you’ll want to look for more good accounts versus bad. In either case, if you discover more bad accounts than good, this can mean a big risk for your property management company.

Recent Credit Checks

If there are a lot of recent credit checks from other rental home companies, this may indicate the prospective tenant was rejected, but not necessarily. If you find multiple inquiries by a single type of business, the best approach is to simply ask the tenant about them. There may be a logical explanation. A lot of recent inquiries from many kinds of businesses can indicate the tenant is trying to pick up too much debt and this can raise a flag.

If you are looking for a great property management company for your rental homes, contact us. At ALH Podland, we provide the ultimate experience in property management services.