7 Reasons Why Landlords Need to Run Tenant Credit Checks

by Chris on August 13, 2018

Is your rental applicant telling you the whole story?

A tenant credit check is a simple way to verify the applicant’s qualifications and gain peace of mind. At the same time, it’s an easy way to flag an applicant who is twisting the facts or holding back pertinent information.

Some landlords avoid tenant credit checks either because the applicant complains or because the landlord isn’t convinced that it’s necessary. Before throwing away the opportunity to spot a problem tenant, consider these reasons why landlords need to run tenant credit checks:

Deterrent

A tenant advocate suggests that renters with bad credit still have a viable option: shop around for another landlord. “Not everyone will require a tenant credit check.”

Is that the applicant you want to have in your property?

Don’t underestimate the power of stating “tenant background check required” in rental ads. That simple phrase can discourage a bad tenant from applying in the first place.

Late Payment History

A tenant whose credit report is impacted by late payments may be someone who will pay rent late — or not at all. This is a telltale sign of a tenant’s disregard for financial commitments.

Eviction, Criminal History

Prior evictions and criminal history are difficult to impossible for Canadian landlords to obtain. But it is likely that evictions or criminal conduct will destroy a tenant’s credit, and that will be evident in the credit report. A poor credit history can flag a bad rental history.

Judgements

A tenant who failed to pay rent to a previous landlord may not be forthcoming with that information. But the credit report can flag judgements from former landlords and other creditors that could have an impact on the applicant’s current ability to pay rent. These creditors may take steps to collect their money, and that can leave the current landlord out in the cold.

Overspending

Poor credit could be a result of high credit balances or making only minimum payments. A tenant who is overburdened with debt may not be able to recover, which can lead to late rent payments and defaults.

Overstated Income

It is inconsistent for a tenant with high income to have poor credit. This may be a sign that the tenant is overstating their income to compete for the vacancy. It can also signal that the tenant has not been at the job for long so the income may be unreliable. Either way, the applicant may not be able to afford the rent.

Conflicting Information

Credit reports can be crucial in flagging discrepancies between the information in the rental application and what is provided to a third-party credit bureau. The report may show previous addresses not listed on the application, a different employer, alias names not disclosed, or signs of identity theft — like a credit history far too long for the age of the applicant. Landlords who discover the information need to ask themselves why the applicant would try to hide it.

Nobody’s perfect, and a blemish on an applicant’s credit history doesn’t necessarily disqualify the individual. It does, however, provide good cause to conduct further due diligence. The trick is to discover this information before renting the property — rather than finding out after it’s too late.

This post is provided by Tenant Verification Service, Inc., helping landlords reduce the risks of renting with fraud prevention tools that include Tenant Screening, Tenant Background Checks, (U.S. and Canada), as well as Criminal Background Checks, and Eviction Reports (U.S. only).

Click Here to Receive Landlord Credit Reports.

Disclaimer: The information provided in this post is not intended to be construed as legal advice, nor should it be considered a substitute for obtaining individual legal counsel or consulting your local, state, federal or provincial tenancy laws.

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