What Landlords Need To Know About The Changes In Credit Report Criteria

Credit report criteria is changing, and as a landlord, you may wonder what this means for you. Credit reports are an important part of the tenant screening process. Credit reports give you a glimpse into the financial responsibility of a potential tenant, and when paired with a background check can help you make an educated decision about renting to a potential tenant.

In an effort to make credit reporting fair to consumers, all credit reporting agencies will be adhering to new reporting criteria. The change is part of the National Consumer Assistance Plan, which was announced last year. The new changes will be taking place starting July 1, 2017.

What The Changes Include

tenant screening symbolWhen the new changes go into effect, all credit reporting agencies will be required to adhere to enhanced Personally Identifiable Information (PII) standards. What do these standards entail?

Any records reported must contain a name, SSN and/or DOB, as well as an address. The goal is to improve the accuracy of reporting by matching records with detailed criteria.

The improved accuracy will impact some ability to report public record data. Credit agencies will now exclude tax liens and civil debts if reports don’t include all of the above PII criteria. Often liens and judgments do not include all of the above data for security reasons.

The goal of this new standard is to ensure that creditors can rely on credit report data and credit scores derived from that data as being accurate. While some data will be lost in reporting, there is a very moderate risk that scoring will be impacted on a major level. In addition, credit reporting agencies believe it will result in a minimal loss of predictive performance.

The Takeaway For Landlords

If you are a landlord and you rely on credit reporting as part of your screening process, the good news is that not much will actually change for you.

Some key takeaways to note:

  • Changes begin July 1, 2017
  • This will affect every credit reporting agency, not just some
  • Only a very small portion of the population even has a tax lien or civil judgment, so most of the reporting will not be affected
  • Due to the reporting of other derogatory-type behavior, the small data change will not impact predictive performance on a major level

If you are concerned as a landlord about the changes to credit reporting, keep in mind that a thorough tenant screening should involve more than just a credit report. While a credit report is a helpful tool for understanding the financial responsibility of an applicant, it should be paired with a criminal background check and an eviction history report for the highest level of accuracy.

TurboTenant’s Quality Screening Process

Here at TurboTenant, we chose to partner with TransUnion, one of the largest credit bureaus in the nation, due to their extreme accuracy in tenant screening reports. By providing credit, criminal, and eviction reports all in one, they are able to cross-match records. This allows them to reduce false-positive criminal hits on applicants when compared to other services that do not provide criminal records.

For example, because they run all the reports rather than piecemeal it out across other agencies, they can get a more accurate criminal record for “John Smith”. By cross-referencing attributes from both their criminal and credit files, they have a greater ability to accurately report.

Tenant screening is an important component of landlording and we take this process seriously at TurboTenant. Our goal is always to provide our users with the best information possible to help landlords make informed decisions. Sign up today to take advantage of our free tenant screening reports.

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