Your ideal tenant may not be the one with the best credit score.
Information on a potential tenant's credit report can often indicate whether he is likely to pay the rent on time and in full. Look at the entire report instead of just the FICO score. Although a low credit score means the potential tenant has had financial issues in his past, it doesn't necessarily mean he wouldn't make a good tenant. Examine the reasons for the low score before ruling him out as a tenant.
Instructions
1. Ask the tenant to fill out an application that includes his name, current address, date of birth, Social Security number, contact information, place of employment and income. Make it clear on the application that the information will be used to run a credit check. Include a section for the tenant to explain any outstanding credit issues, such as bankruptcy or late payments. Copy the potential tenant's driver's license as well for your records. Make sure he signs the application.
2. Provide the information to an agency that provides tenant credit reports. Although you can apply to request credit reports directly from the credit bureaus, it's often an arduous process. The supplying agencies have the correct credentials already and offer the reports at an affordable fee, often $15 per credit bureau report. Ask for additional reports if provided, such as rental history.
3. Review the report, looking at the positive and negative items as well as the credit score. Scores typically fall between 400 and 850, with 400 being a low score. A low score might indicate a significant credit issue such as a bankruptcy. However, bankruptcy doesn't necessarily mean the person is a bad risk as a tenant. Review the mortgage information, if available, as well as the rental history and evictions. Someone who lost his job a year ago and filed bankruptcy, but who is currently employed and never missed a rent payment, is likely a good risk. People with decent credit scores but who have been evicted in the past might be a bigger risk. In a down economy, many people rent because their credit isn't good enough to buy a home, so don't expect spotless credit records. On the other hand, a person with a high credit score who has no rental or mortgage history, such as a recent college graduate, might not be a good option as a tenant because he's new to the prospect of having to pay rent every month.
4. Compare the potential tenant's application to the credit report. If the tenant didn't disclose major credit issues listed on the report, that's a red flag that she might not be honest and could be a bad risk. If there's a major credit issue on the report that the tenant described on the application, review the description to help determine whether she is likely to be a good tenant. If she filed bankruptcy because she was laid off from her job but is now employed with a positive rental history, she might be tenant who pays rent on time every month.
5. Call the potential tenant's employer to verify employment. Employers don't verify salary amounts, but you can request formal verification in writing on letterhead from the human resources department. This helps eliminate the possibility that the tenant has listed friends to vouch for him instead of an actual employer. A tenant without steady employment is a bad risk.
Tags: credit score, potential tenant, rental history, application that, credit issue, credit issues