Landlords need to know that tenants will be responsible and pay their rent on time. For many who own property that they rent out, one of the best ways to do this is by doing a tenant background check. With permission of the prospective renter, a landlord can verify things like proof of income, work history, rent history and credit rating. Many landlords are able to do most of this verification on their own, but they may require some extra help when it comes to conducting a tenant credit check.
Credit rating and any poor credit history is generally calculated by one of several credit reporting agencies. The most common used in the US are Experian®, Equifax® and TransUnion®. These agencies offer the ability for landlords to check credit from all three agencies for a combined score. This typically costs money, and price varies depending on the agency performing the check.
In addition to reports from credit reporting agencies, there are numerous private companies that can run credit checks through the various reporting bureaus. For landlords or property companies with many rental properties and the frequent need to perform new credit checks, some companies offer a subscription service that may reduce fees. Other landlords merely ask prospective tenants to pay a fee to check their credit. The latter method can be frustrating for those who must pay this fee more than once if applying for several places to live, because many landlords won’t accept a credit report they did not initiate.
Those who want to run a tenant credit check usually need to obtain signed permission for credit checks to be performed. Companies that offer credit-reporting services tend to require proof of this permission. Landlords will also need to obtain full names of those who will be responsible for paying rent and social security numbers of potential renters.
Though agencies may boast of their ability to make sure that a tenant credit check verifies good rental history, this may not be something that appears on a credit report. The only way poor rent history shows up on these reports is if landlords who were not paid or not paid on time took action and reported it to a credit reporting agency. This means the average check may not say that much about the specifics of rental history and rental payments in the past. A better measure of ability to pay rent may be by speaking with former landlords to verify good rental history.
What a tenant credit check can do is help a landlord determine if a potential renter has a history of not paying other types of bills, like utility or credit bills, or if they have bankruptcies within the last ten years, or other large unpaid bills. They can also evaluate debt to income ratio. Again, these don’t necessarily influence the ability for a prospective tenant to pay rent, and many people with large bills are quite capable of meeting their monthly rental payments.
