11 Tips for Analyzing Tenant Credit Reports and Background Checks
Credit reports hold valuable personal information. If you request access to a tenant’s credit report using landlord software, you decrease the risk of losing a tenant’s personal information. Everything is backed up online and stored in the cloud. Tenants appreciate the confidentiality and the ability to share their report with multiple landlords at no extra cost.
#2 Be Careful with Confidential Information
If you’re running a credit report on your own, you typically need a tenant’s social security number (SSN). Tenants don’t always feel comfortable sharing this information. However, if you use landlord software, your prospective tenant can enter his or her SSN and you never see it, which protects you and your tenants.
#3 Make Sure It’s a Soft Inquiry
Tenants are also worried about credit reports that are hard inquiries, which hurt their credit scores. Soft inquiries, on the other hand, don’t affect their credit score at all. This is another benefit of using landlord software- the credit report will not negatively impact a tenant's score.
#4 Higher Credit Scores are Better
When you first look at a credit report, you may be a little overwhelmed by the information. Keep in mind that credit scores range from 300-850 and the higher the score the better. We typically tell our landlords that a good credit score to accept is 680 and up, but it's best to look at all of a tenant's information before deciding based on the score alone.
#5 Timely Payments Indicate Rent Will Likely Be Paid on Time
In the credit report, you can see if tenants are making their payments on time (car payments, credit card payments, etc). You can also see if tenants have outstanding debt. Be sure to pay attention to debt, skipped payments, or paying late repeatedly.
#6 Find Out If Your Rent Price is Affordable for the Tenant
Given the tenant’s other monthly payments and income, you can factor in your rent price and find out if renting with you is truly affordable for the prospective tenant.
#7 It Can Be Risky to Rent to Tenants with Criminal History
Tenants with a criminal history are riskier to rent to. If anything goes wrong on your property, you could be liable because you chose to rent to that tenant. When examining criminal history, it’s especially important to pay attention if the tenant has committed crimes recently, has committed several crimes, or has committed more serious crimes like felonies, theft, trespassing, etc.
#8 Verify a Tenant’s Identity
Credit reports also verify the tenant’s identity using his or her SSN. While it's rare for a tenant to fake his or her identity, it’s still worth checking during tenant screening. Better to find out before you rent to someone.
#9 Background Checks Scan All 50 states and Multiple Databases
Our background checks scan all 50 states and various databases, including the Drug Enforcement Administration, FBI’s Most Wanted, Homeland Security, among other ‘most wanted’ lists for various Government bureaus.
#10 You Can Deny a Tenant Because of Information on the Credit or Background Check
Fair Housing Laws state illegal reasons for denying a tenant. For example, it is illegal to deny housing based on protected classes, such as race, gender, age, etc. But you are allowed to deny tenants because of information you found out on their credit and background checks.
#11 The FCRA Requires you Disclose the Reason Why You Are Denying a Tenant (If It’s Due to a Credit Report)
According to the Fair Credit Reporting Act (FCRA), tenant credit reports are considered “consumer reports.” Any user of a consumer report is legally responsible for using the information on a consumer report fairly and keeping it confidential. You must also notify the tenant if you take an “adverse action” (denying the tenant) as a result of information on the report. This protects tenants, so no one misuses their personal information.
Next Steps
In addition to reviewing the tenant’s credit report and background check, you are also reviewing the tenant’s rental application among other tasks. Learn all 7 steps to screen your tenants here.
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