The best predictor of future behavior is past behavior. If you want to know whether that new renter is going to pay the rent on time, it's wise to run a credit check.
You will need
- Credit reports and scores
- Written permission
- Credit request form
- Information about the tenant
- Filing cabinet
- Screening service
- Credit score standard (optional)
- Confidentiality (optional)
Step 1 Understand credit reports Learn how to interpret a credit report and credit scores before you start pulling them, so you will know bad credit when you see it.
Set a minimum credit score or other standard that will help you decide if a tenant’s credit is acceptable.
Step 2 Obtain written permission Get written permission from the person before pulling their credit. Have them sign a form and keep the form in a file about the prospective renter.
Step 3 Obtain identifying information Get the full name, Social Security number, and address of the tenant so you can identify them to credit reporting agencies.
Step 4 Pull report Request reports from the three major reporting agencies — Equifax, Experian, and TransUnion. Some creditors only submit to one agency but, to ensure you have all of the information, you need to get all three reports.
Step 5 Pay fee Pay the fee for viewing the report and credit score. You can shop around for the best price, but if you don’t go directly to the reporting agencies, make sure the company you use is reputable.
Credit checks typically cost around $20, but you can charge the prospective tenant whatever you want.
Step 6 Protect sensitive information Take proactive steps to protect sensitive personal and financial information about prospective renters by keeping records in a locked filing cabinet and shredding documents you no longer need.
Avoid sharing credit information with your employees or others unless there is a valid business purpose and you trust them to keep the information confidential.
Step 7 Consider a long-term screening service Look into screening services that provide even more background information on your prospective tenants, like criminal background checks, or consider a package deal to save money next time. You’ll be a better landlord with the right information at your fingertips.
Did You Know:
The Federal Fair and Accurate Credit Transactions Act of 2003 allows that every U.S. resident may annually order one copy of their credit report from each of the three major credit bureaus without paying a fee.