A tenant credit check shows the potential tenant’s credit score as well as details about their recent credit history, including instances of non-payment or delinquencies. A rental credit check is run by landlords to screen potential renters who have financial or personal problems.
Landlord credit checks allow you to have a clear picture of the potential tenant’s full financial status and reliability before you sign a lease. As such, they protect you from getting into a legally binding agreement with someone incapable of holding up their end of the bargain via timely rent payments.
Since the tenant credit check shows the renter’s income and his or her debts, you can make an informed decision about whether or not the renter can afford your apartment. It’s generally accepted that rent should constitute no more than one-third of your expenses per month.
If you learn that your tenant has a high debt-to-income ratio, or that your rent would constitute greater than one-third of their income, it’s in everyone’s interest you deny this person’s application. When a renter is unable to afford an apartment, they may fall behind on other payments (such as a car loan) to make rent, or slowly fall behind on the rent.
Checking credit for renters does mean extra work for you as the landlord. If you have a lot of empty apartments to fill, you may be tempted to skip a credit check for a friend of a friend or someone who seems trustworthy.
Unfortunately, these assumptions can cost you. If you skip a credit check, you could wind up with a tenant who has a track record of missed payments or who is struggling with credit card balances. Or you could end up with a tenant who has a criminal history, and who threatens the safety of residents in your multifamily unit. Is this a risk you’re willing to take?
Although a tenant credit check requires additional steps, AAOA works with you to streamline the process and make it easier than ever to effectively screen potential tenants.
We often get asked how to run a credit check for a prospective tenant. While the process may seem overwhelming at first, it’s really quite simple. Below we break it down in three easy steps:
Now that you’ve learned how to do a credit check, the next step would be to select the right tenant and have them sign a lease agreement .
As a landlord, you’ll often find renters that have problems pop up on their credit reports. This may sometimes even be the reason they’re renting — their credit may not allow them to buy a house. However, this doesn’t necessarily make them a poor tenant choice.
A renter’s credit check will show you some of the details about their credit history, allowing you to see if the prospective tenant has made wise financial decisions in recent months. As you look through this information, some items to keep an eye out for include:
If you spot any of these red flags, decide whether you feel comfortable proceeding. You might opt not to take a chance on a renter with an arrest record or outstanding debts when a qualified applicant is interested. You can also decide to ask the renter a few questions to determine if problems — like bankruptcies or a period of delinquency — were due to unexpected financial situations that have since been rectified.
Ultimately, landlord credit checks make the process transparent for the renter and you by painting the bigger picture, so you will be more informed and able to make better decisions about your rentals.
AAOA’s tenant screening services address the needs of landlords, property managers, real estate agents and others by providing:
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A renter credit report is specifically designed to meet landlords’ needs. Working with a business that specializes in online credit checks for landlords ensures you have the exact information you need to make the right decision for your property. The American Apartment Owners Association offers credit checks for renters that work quickly to get you the information you need.
To get started, download a free rental application form and purchase your tenant screening package from the American Apartment Owners Association. Enter your tenant information and get immediate access to many reports which include evictions, background checks and other screening services.
Then, your tenants will receive an email with a unique link to confirm their identity and provide permission for you to see the tenant credit report. As soon as they provide permission, you will receive an email with a link to the credit report and score. This requires no underwriting or additional documentation. You can also skip this tenant cooperation method by becoming underwritten.
Don’t make the mistake of renting to people who may not have a solid financial track record. Purchase your complete tenant screening package with a renter credit report today and take advantage of our $10-off special offer for American Apartment Owners Association Pro Plus Members.
