Check Tenant Credit with a Credit Report and FICO Score
Check Tenant Credit: Landlords can obtain a full and complete credit report on all prospective tenants
Evaluating the track record of your rental applicant’s payment history is a key part of the process in screening for good tenants. This vital data will reveal just how reliable is this person when it comes to meeting their financial obligations and making timely payments to their creditors.
While it can be a mistake in some cases to make your entire decision solely upon tenant credit via a credit report or FICO score, you should be particularly alert to any delinquent or collection accounts that you discover as you check tenant credit. Generally speaking, FICO scores that are under 625 most often represent an elevated risk to the landlord as it pertains to receiving prompt rent payments. This doesn’t mean that an applicant with a credit score of 480 couldn’t be a perfect tenant. However, it signals a red flag that anyone renting property should not ignore.
High renter credit scores can be interpreted as good news, at least most of the time.
At the opposite end of the scale are those tenants with credit scores that are in range that signify exceptional. While it may be debatable exactly what that threshold is, we generally don’t find very many applicants that have a credit score above 700. Any score that is in the 700 range and above (up to a maximum of 850) usually puts a smile on the face of the majority of “expecting” landlords.
Rental Credit History For Landlords: Requires Careful Consideration if the Credit Bureaus Lack Data that Should Be Reported
Before jumping to any conclusions, be sure to check for a false FICO score to eliminate the possibility that there may be outstanding judgments and evictions that have o in background check that does not appear in the credit history. Any landlord that discovers this should immediately proceed with caution and realize that things may not always be as they appear. We have been highly skeptical for a long time about placing too much reliance on credit reports due to the fact that the credit reporting bureaus lack comprehensive data.
Evaluating renter credit history may be more of an art than a science.
A good example of this may be the scenario of considering a rental applicant that has recently filed for bankruptcy. These applicants cannot be expected to have a very high credit rating, and yet they may represent the prospects of being a good tenant. This whole premise is based upon the theory that the rental applicant very much wants to take advantage of a new “fresh start” that affords him of the opportunity to re-build his credit in such a way that he may look forward to having a high credit score someday. On the other hand, landlords are often presented with applicants who have filed for bankruptcy, but the case was later dismissed. This means that none of the debt was discharged in the bankruptcy. This situation deserves special attention to look for signs that may indicate that the applicant could pose higher levels of risk because of the elevated levels of debt and unreliable payment record.
We are especially wary of cases where the tenant credit check reveals that applicants have filed for bankruptcy and then continued in their ways of disregarding their payment obligations with a string of judgments and/or evictions as well as collection accounts that may when you check tenant credit.