Background and Credit Check FAQ

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Q. Why should I credit check my prospective tenants?

A. There’s really no 100% guarantee, but having a thorough screening process of your prospective tenants, which includes doing credit checks and reference checks and having your tenant complete a Tenancy Application Form, can significantly reduce the risk of getting a problematic tenant.

Q. How can I run background check and credit check on my prospective tenants?
A. There are countless of ways to do a thorough background check and credit check on your prospective tenants

To start a credit check, you need ask your prospective tenant to fill-out written rental applications, get his or her permission to run the background and credit check, double check the  information he or she provides (ask for valid ID or government ID), call his or her last landlord,  call his or her employer, and make sure all the provided information are correct.

You can get credit report from three major credit bureaus in the US; Experian, Equifax, and TransUnion.

There are also many websites that can provide you with good credit report for a reasonable price. You can require your tenant to pay for his or her credit check as part of your application fee.

Q. What am I supposed to check in tenant credit reports?

A. You need to know if your tenant pays his or her bills on time, know his or her history as a tenant, and know more about the person’s capability to pay and take care of your rental property. This includes personal information such as full name, current and past addresses, employers, Social Security number, spouses, credit card limit, public records, payment pattern, and reported cases of bankruptcies and evictions among other things

Other important information you need to look for in a credit check is the tenant’s consistency and financial stability, rental history, debts, and credit accounts.

Q. Should I ask my prospective tenant to pay for his or her credit check?

A. This is a matter of personal preference. Credit check is usually at $15-$20, so if you have many applicants and you don’t think you can pay for all of them, then you can always charge a fee them as part of their application fee. Also, applicants with poor credit history will not consent to pay a fee, which should signal a red flag for you.

Some landlords deduct the fee from the from the first month’s rent should the applicant is accepted, or put it to their security deposit.

Q. How long does a credit check usually take to run?

A. This depends on the agency you used for the credit check. Some agencies can provide information in as fast as a couple of minutes or less. While others may take a few days to verify.

Q. What are ways to protect myself when accepting tenants with bad credit?

A. There are two ways you can do this – one is to require bigger security deposit, or to ask the tenant for a co-signor. Of course, you should first give your prospective tenant an “Adverse Action” letter stating that their bad credit history is your reason for the additional stipulations.

Q. How can I decline an applicant with bad credit?

A. The Fair Credit Reporting Act requires tenants to take certain steps in declining applicants. The first thing you need to do is to mail an “Adverse Action” letter to the decline applicant(s) and state the reason why they’ve been declined from renting the rental property unit.

You are also required to include the name of the agency you used to run their credit check, along with the phone number and full address of that agency and inform them of their right to get a free copy of the credit report within 60 days.