Why Landlords Need to Check Tenant Credit

by Chris on August 17, 2020

Some tenants grumble about running their credit during a tenant background check. They say it invades their privacy or that their credit doesn’t matter. But credit does matter. Here’s why:

Credit Reports Serve as a Cross-Check

The secret to exposing tenant fraud or an applicant’s lack of qualifications is cross-referencing multiple sources of information.

The tenant’s credit report serves as a cross-checking tool that helps to verify qualifications while at the same time exposing inconsistencies. A credit report can flag:

Overstated income. An applicant who claims a high income yet has poor credit may be exaggerating income;
Fake identity. A person who does not know the answers to key questions when ordering a credit report may not be who they claim to be;
Overspending. Overburdened tenants are scored lower on credit reports. This is someone who is on the brink of financial trouble and may not be able to pay rent consistently;
Outstanding judgements. This applicant could be subject to collection activity. Garnishments may interfere with the ability to pay rent; and,
Undisclosed information. The landlord may discover an unreported address or other information that conflicts with the rental application. That can signal a previous eviction or other issues with rental history.

Credit Reports Come from an Independent Source

Tenant screening information must come from multiple sources, not the applicant alone. A credit report is maintained by an independent third party to ensure that the information is accurate and that precautions are taken to match the applicant to the report.

By running the tenant credit check, the landlord can verify that the information provided by the applicant is true. Likewise, the landlord can catch a tenant who is making up stories.

Tenant Credit is a Predictor of Rent Payments

Some tenants want to be qualified on income alone. But income is not a predictor of a person’s sense of financial responsibility. A tenant credit check is.

A credit report provides a picture of the applicant’s overall commitment to make installment payments consistently and on time. Persistent late payments or defaults foreshadow late and missed rent, regardless of the tenant’s ability to pay.

Good Credit is an Incentive

Landlords want to find tenants with good credit to increase the odds of on-time rent payments. Tenants with good credit want to keep it that way. These tenants are more likely to pay on time, to avoid damage to the property, and to work out any conflicts. These tenants want to leave with their good credit intact and a good reference from their landlord.

Those with poor credit or a bad rental history want to avoid credit checks altogether — perhaps the best reason of all to run tenant credit checks.

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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