Tenant Credit Checks - Why......Everyone has BAD credit

October 16, 2009

It’s rather difficult to find anyone who has not been affected by the economic troubles of the past year. If everybody’s credit is bad, why bother to do a credit check?

Why bother with a tenant credit check when it’s going to be bad? Besides, if I skip it, I save money, right? Actually, the money you invest by conducting tenant screening will more than pay for itself when you consider the long term cost of evicting and/or cleaning up after bad tenants. Don’t just look for bankrucites? View a credit report will allow you to compare their monthly income to what they are actually reporting.

Can I ask why a prospective tenant has had a bankruptcy? Yes. There is no time like the beginning to start communicating clearly with your tenants. If there is a bankruptcy on the credit check, ask what happened. You may find out that medical bills forced the tenant into bankruptcy, or that an ex spouse was actually the cause. Of course, if the tenant has other red flags on the credit report, you must take them into consideration, too.

Take a wide-angle view of the tenant’s credit history. If a bankruptcy is several years in the past, and everything else checks out, they may be an acceptable risk. If the bankruptcy was due to a business failure, the economy could be to blame—not the tenant. Past evictions and utility judgments are higher risk indicators to many landlords than bankruptcies.

What Will a Tenant Screening Credit Check Tell Me? The credit check will reveal how promptly the applicant pays credit cards and loans, plus any outstanding judgments or bankruptcy filings. Look for a good record of responsible finances, and see if the applicant appears to be living beyond their means. Conservative spenders will be more likely to survive an emergency or job loss without major upheaval—like breaking your lease agreement.
The credit check will also reveal previous addresses—compare these with the application and investigate any inconsistencies. There could be a simple explanation—or the prospective tenant could be hiding something.

Only you can decide whether a poor credit score or bankruptcy is worth the risk. The important thing is to perform consistent tenant credit checks!

Remember that all information you learn from a credit report must be held in strictest confidence, and never shared with third parties. Your applicant may have a right to the report—check your state’s guidelines and the Fair Credit Reporting Act (FCRA) to be sure you are compliant. If you reject an applicant for credit reasons, you must advise them in writing.

Check out Tenant PI’s Credit Reports and all the financial information available to help you in the tenant applicant process.

Source: Tenant Screening Blog www.Tenantscreeningblog.com




Subscribe to News RSS Subscribe to Blog RSS	« Back to Blog Tenant Credit Checks - Why......Everyone has BAD credit October 16, 2009 It’s rather difficult to find anyone who has not been affected by the economic troubles of the past year. If everybody’s credit is bad, why bother to do a credit check? Why bother with a tenant credit check when it’s going to be bad? Besides, if I skip it, I save money, right? Actually, the money you invest by conducting tenant screening will more than pay for itself when you consider the long term cost of evicting and/or cleaning up after bad tenants. Don’t just look for bankrucites? View a credit report will allow you to compare their monthly income to what they are actually reporting. Can I ask why a prospective tenant has had a bankruptcy? Yes. There is no time like the beginning to start communicating clearly with your tenants. If there is a bankruptcy on the credit check, ask what happened. You may find out that medical bills forced the tenant into bankruptcy, or that an ex spouse was actually the cause. Of course, if the tenant has other red flags on the credit report, you must take them into consideration, too. Take a wide-angle view of the tenant’s credit history. If a bankruptcy is several years in the past, and everything else checks out, they may be an acceptable risk. If the bankruptcy was due to a business failure, the economy could be to blame—not the tenant. Past evictions and utility judgments are higher risk indicators to many landlords than bankruptcies. What Will a Tenant Screening Credit Check Tell Me? The credit check will reveal how promptly the applicant pays credit cards and loans, plus any outstanding judgments or bankruptcy filings. Look for a good record of responsible finances, and see if the applicant appears to be living beyond their means. Conservative spenders will be more likely to survive an emergency or job loss without major upheaval—like breaking your lease agreement. The credit check will also reveal previous addresses—compare these with the application and investigate any inconsistencies. There could be a simple explanation—or the prospective tenant could be hiding something. Only you can decide whether a poor credit score or bankruptcy is worth the risk. The important thing is to perform consistent tenant credit checks! Remember that all information you learn from a credit report must be held in strictest confidence, and never shared with third parties. Your applicant may have a right to the report—check your state’s guidelines and the Fair Credit Reporting Act (FCRA) to be sure you are compliant. If you reject an applicant for credit reasons, you must advise them in writing. Check out Tenant PI’s Credit Reports and all the financial information available to help you in the tenant applicant process. Source: Tenant Screening Blog www.Tenantscreeningblog.com	Tenant PI puts credit reports, nationwide criminal background checks and unique landlord history reports just one click away.