Understanding how to run a credit check on a tenant is essential in choosing a responsible and stable renter who will pay rent on time.
This article examines the steps needed to run a legal credit check on prospective tenants after obtaining their written authorization and collecting applicable fees.
Why Run a Credit Check on a Tenant?
As a landlord, you may have already learned how to run a credit check on a tenant. One of the primary purposes is to gain critical insight into a renter’s job stability, credit history, and ability to timely pay rent.
It also helps you determine whether the tenant can afford to live in your rental property.
What Do Tenant Credit Checks Look For?
Tenant credit checks look for the following information to help you decide the risk of a potential renter:
- Job stability
- Consistent income amount
- Credit score (medium to high scores)
- No bankruptcies
- No late or delinquent payments on rent, utilities, student loans, or car loans
- No blemishes on credit history
- No judgments against the tenant
- No criminal convictions
- No pending legal issues (e.g., personal injury lawsuit)
- Past evictions (allowed in some states)
What Information Does a Landlord Need for a Credit Check?
You can quickly gather the information needed for a credit check from a completed rental application.
As a landlord, you will need a prospective tenant’s name, address, and social security number, or individual taxpayer identification number.
How to Credit Check a Tenant
How do landlords check credit? The primary steps to take when running a credit check are:
- Use the rental application to verify the tenant’s full name, address, and social security number.
- Request written permission from the tenant to run a credit check.
- Collect any fees needed to run the credit check or screening.
- Confirm to the selected credit bureau that you are the landlord of the rental property.
- Run the credit check and receive instant results.
As a landlord, if you have many applicants, you do not need to run a credit check on each one.
Analyze the applications and request fees only from the tenants who initially meet your standard qualifications (e.g., stable employment or an acceptable debt-to-income ratio).
Where to Run Credit Reports for Tenants?
You can order credit reports online from the credit bureau of your choice with immediate receipt of results.
In addition, the three main credit bureaus now offer tenant screening services, many of which provide a background check in addition to the basic credit check and credit score:
How Much is a Credit Check for a Tenant?
The cost typically ranges from $25 to $50, depending on whether you request only a credit report or additional background checks.
Some states limit the amount you can charge a tenant for credit and background checks.
For instance, New York limits the fee landlords can charge to the actual credit and background check cost but no more than $20.
What to Look for in a Credit Score
When conducting a credit check, landlords may automatically get a tenant’s credit score because the numbers often come with the credit report.
The FICO score is the most commonly used credit score. It ranges from 300 to 850, with any score above 670 considered good.
The notice must also advise the tenant that they have a right to request a free copy of their report within 60 days and that the credit bureau did not decide to reject it.
This is a requirement of the federal Fair Credit Reporting Act.
