FICO Scores: Unreliable for Tenant Screening
FICO Scores: Unreliable for Tenant Screening?
Unfortunately, there are still many landlords who still continue to use FICO credit scores as the sole basis to determine the eligibility of their prospective tenants in a tenant background check. There is a serious flaw with this approach. There are many reasons that you should not rely upon a credit report obtained in a tenant screening:
- Far too many tenant credit reports contain misleading and false information.
- Credit Reports often fail to report judgments, evictions and tax liens.
- A FICO score is a man-made number that arbitrarily sets “acceptable” ranges you should not rely upon for screening tenants.
If you use a FICO score which fails to factor in key pieces of relevant data that would otherwise eliminate the applicant despite an artificially high score, this knowledge makes the credit score irrelevant and absolutely undependable. On the other hand, you may have a very good rental applicant that has filed for bankruptcy and got a discharge recently.
However, if you were relying upon a FICO score, you would decline a potentially great tenant because of his or her low credit score. For this reason, we encourage you to focus on what is relevant and really important to the tenant verification process and that is to determine if your applicant has a track record of delinquent accounts and collection activity. This not only includes evictions and judgments, but also obtaining records to verify that is no history of delinquent accounts and collection inquiries as well as trade lines. If you are seeking a debt to income ratio, it is far better to have your applicants provide you with documentation that can be compared with known tradelines.
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