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?
- What Do Tenant Credit Checks Look For?
- What Information Does a Landlord Need for a Credit Check?
- How to Credit Check a Tenant
- How to Check a Tenant’s Credit Score
- Where to Run Credit Reports for Tenants?
- How Much is a Credit Check for a Tenant?
- Use A Free Rental Application to Get a Tenant Credit Check
- Frequently Asked Questions (FAQs)
- Related Articles for Landlords
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.
You must obtain written permission authorizing you to run a credit check and you can include that request within the rental application.
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).
How to Check a Tenant’s 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.
If you reject a tenant for negative information on their credit report, you are required to provide the tenant with an adverse action notice which must include the name, address, and phone number of the credit bureau.
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 make the decision for rejection.
This is a requirement of the federal Fair Credit Reporting Act.
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 whom 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 also 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 cost of the credit and background check but no more than $20.
To avoid paying multiple times, a tenant may obtain their current credit report.
Keep in mind that a landlord is not required to accept a copy in some states and can request fees to pull a new credit report.
Use A Free Rental Application to Get a Tenant Credit Check
Use our free rental application to collect the essential information you need to run a tenant credit check. You can also use our step-by-step builder to create a rental application valid for your state.
Protect your property interests by taking the time to gather the most information you can to choose the appropriate tenant.
Frequently Asked Questions (FAQs)
Here are some of the most commonly asked questions about how to run a credit check on a tenant:
Credit screening is often a task outsourced to a third-party company that performs the screening instead of a direct request from a landlord.
Tenant screening often checks and validates identity, criminal record, sex offender status, evictions, rental payment history, employment verification and history, and background information in addition to checking consumer credit.
Private landlords can do a credit check on any prospective tenant and legally use the information when selecting tenants.
They must, however, obtain authorization from the tenants, and landlords need to ensure they do not violate the Fair Housing Act or their state’s fair housing laws.
A landlord can do a credit check on a tenant by getting the tenant’s permission and paying the fee directly to a credit bureau.
You can also use a third-party screening agency and have the tenant submit their application directly to the service, who will provide you with the credit check at no direct cost.
Conducting a tenant screen online is the quickest way to obtain relevant information on your tenant. You can submit the necessary data with your selected credit bureau and often receive your report within minutes.
You can do a tenant screening using public records. While they may not have all the details of a paid credit check, public records can include helpful information like bankruptcies and evictions.