Your Guide To Your Applicant’s Credit Report

Credit reports can provide great information about tenants to landlords and property managers. We’ll tell you what those reports mean and why they’re important in tenant screening.

A thorough tenant screening will provide you with a good idea of the suitability of your applicant. We recommend that landlords pull, at a minimum, a credit and criminal background report. Once you run the credit check, you will get a credit report back on your tenant that includes valuable information on their credit history. We’ll show you how to interpret the results. How do I get tenant credit reports?

There are three main credit bureaus: TransUnion, Equifax, and Experian. All of these companies allow landlords to run credit checks for a fee. Landlords and property managers can sign up for software that offers free credit reports for landlords, which can be more cost-effective in the long run.

What will the credit report look like?

Depending on which company you pull reports from, your report may look something like this:

What’s included on a credit report?

The credit report includes the following information:

  • Credit Bureau Score
  • SSN Verification
  • Employment History
  • Fraud Indicators
  • Address History
  • Payment History
  • Collection Accounts
  • Civil Records

Key Terms

Inquiries – This will show you the number of inquiries run. For example, if you were applying for a store credit card, this could show up here. Remember, “hard” inquiries are those run when applying for loans. These inquiries will affect your credit. When you check your own credit report, this is a “soft” inquiry and it does not affect your credit score.

Derogatory Items – These are negative items that generally late payments or delinquencies. Examples include tax liens, bankruptcies, collection accounts, and judgments.

Tradeline – This is another word for “account.” You will see the different types of accounts, including open accounts and those closed with a balance.

Revolving – Charge accounts with minimum monthly payments and credit limits, like credit cards.

Installment – Accounts that have a fixed number of payments with a fixed payment amount, like student loans.

Mortgage – Loans secured by real estate that you own

Credit Scores

You may be thinking, “What is a good tenant credit score?” How “good” or “bad” a credit score is can depend on the scale that is used by the credit bureau that you use. For instance, TransUnion compares a score of 750 and above to getting an “A” in school. Take a look at the chart below to get a better idea of what an average credit score could look like.

What If My Tenant’s Credit Score is Not that Great?

Talk to your applicant to see what their credit history is like. They may bring up credit issues before you even run the report. Use those landlord references to get an idea of what their recent financial stability. If you would like to pursue the applicant, you can consider having someone cosign the lease and/or increasing the security deposit in case they are unable to pay rent in the future.

While you might be tempted to skip running a tenant credit report, we recommend that do. These reports can indicate the ability of a tenant to consistently pay rent, which is something that every landlord wants to know. Go with a company that will provide landlords with free tenant screening and you’ll have one more tool in your landlord toolbox.

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