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How
to Run Credit Check on Tenants
Landlord Tenant Credit Check PART 3
Of
the many tools available to landlords, nothing is more helpful than a
landlord tenant credit check when it comes to screening your potential
renters. In this final Part
3
of our Guide on How to Run Credit Checks on Tenants, learn
what you can do if your
tenant applicant has no credit history and how to reject someone
correctly.
Do you know
why it is important to run credit check on tenants and how you can
obtain their credit reports? If No, Click
here for Part 1
of this Credit Checks Guide.
What
if Your Tenant Applicant Has Zero or a Limited Credit History?
If
you ask around, some people will actually tell you to run far, far away
from anyone without a credit history. This is wrong actually. You must
first understand why some people do not have any credit history when
you run a landlord tenant credit check on them.
Many renters are new immigrants or youths who
haven't had the time to establish their own credit. This is by far the
most common reason for someone not have a credit history. Some people
pay for everything by cash to avoid any debts. No outstanding loans
taken up naturally means there is no credit history to speak of.
But
there is a disturbing scenario that you must be aware of when you run a
credit check on tenants. It's possible
that some people were suffering from terrible credit scores and engaged
a credit repair company to clean up their credit history. These people
will likely be high risk tenants when it comes to rent payments.
So
how do you screen someone without a landlord tenant credit check? In
this case the most effective way is to ask your applicant for his
financial statement and income records.
If your tenant is
willing, ask him to show you his bank account statements. Ideally he
should have enough free cash to cover at least 3 to 6 months of the
rent. His employment records are equally important. It is preferred
that he has a stable job with regular pay. As a general rule of thumb,
his salary should be at least 3 times of your asking rent.
What
You Must Do When Rejecting Someone Due to His Credit Report
If
you run a credit check on tenants and reject someone due to his credit
report, you are required by
the Fair Credit Reporting Act FCRA to give him an Adverse Action
Notice. Whether the credit report was the sole reason for the rejection
or played just a tiny role, you will still have to hand him this
Adverse Action Notice.
What
goes into this Adverse Action Notice?
1. You have taken an adverse action (rejected their rental application)
solely or partly due to the landlord tenant credit check.
2. The name, address and telephone number of the Credit Reporting
Agency CRA that supplied the credit report.
3.
Statement declaring that the above CRA was not involved in taking any
adverse action against them and therefore is unable to provide reasons
for the rejection of their tenant application.
4. Your rejected
applicant has the right to ask for a free credit report from the CRA
and dispute any incomplete or inaccurate information listed on his
credit report.
It's important that you know that the CRA that we
are talking about here is not the sites that you use for running your
landlord tenant credit check such as Tenant Verification Service
and E-Renter.
The CRA almost always refers to the one of the three major credit
bureaus - Equifax, Experian or TransUnion.
Read
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What are Your Top Tips for Running
a Landlord Tenant Credit Check?
Credit reports are possibly the most important tenant screening tool that you can have. What are the clever ways that you can use it to choose the best tenants? Share your valuable experience with everyone here - We will love to hear your tips, comments and real life stories:
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My Tip for Tenant Credit Checks
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Some potential renters are highly concerned with any negative and false information that may show up when you run a landlord tenant credit check on them....
Do you want to learn MORE must-know facts on
running a tenant credit check?
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