How to run a Credit Check on your Tenants

Credit Report

Running a credit check on your prospective tenants as a landlord is an important part of the screening process and a good way to help ensure you’re looking at qualified tenants for your rental property. 

Here are some steps you’ll need to complete once a tenant completes the application:

  • Verify tenants name, employment, and prior rental histories
  • Get the tenants written permission to run a credit check (sometimes this is covered in the application process)
  • Choose the credit reporting agency you want to verify (or all 3)
  • Pay the any fees for doing the search
  • Run the credit check
  • Analyze the results as part of your application process

A credit check is a good way to look into a tenants ability and history of borrowing money, and better yet ability to pay their debts on time (including your rent).   Some people may not have a credit history if they’re young or haven’t done much banking in their life.  If no credit history is available, other good checks to run on your tenants (and recommended to do so in addition to credit) is criminal background checks, employment verification, and rental history verification.

What info do you need to run a credit check?

  • The completed rental application with full legal name, social security number, birthdate, address for past two years, current landlord, and current employer – Anyone over 18 living in the property needs their own application and you’ll want a credit report on each applicant.
  • You must have the tenants permission to run a credit check and follow the Fair Credit Reporting Act guidelines.
  • Verify that you are the landlord with some form of ID, mortgage statement, or proof that you are the rental property owner.

Where can I run a credit check on my tenant?

Various companies offer credit check services.  One common way is to go through one (or all) of the three major credit report bureaus: Equifax, Experian, or TransUnion.  Rental Guys Property Management also offers tenant screening options that includes the application, credit and background reports all paid for by the tenants.  We can run the reports and turn over to you to analyze even if you want to do a for rent by owner.  We can even help advertise and place a tenant in your property if you wish and then you can take over the management.

How long does a credit check take?

Approval time can vary from service to service.  You should account for a couple of days to a week or two.

Rental Guys Property Management can screen your tenants application and credit and background reports in usually less than 24 hours, most of the time same day.

Should you accept a credit report the tenant provided?

It’s recommended to run your own credit check, unless a tenant has a very current report that may have been ran recently for another application.  Just be wary of any dated reports as their credit situation could have changed from then to now.

What is included on the credit reports?

The credit report will have lots of detailed financial information about the prospective tenant.  In addition to their personal info, it will tell you:

  • Fraud Indicators
  • Financial Summary – on-time payments, payment pattern over last 2 years, total estimate of monthly payments, credit card use, & total debt
  • Account Summary of bank accounts, loans, credit card accounts, loan amount/credit usage, how long accounts were open for
  • Public Records – Current & past residential addresses, known employers, evictions, bankruptcies, tax liens, and civil judgements against the applicant
  • Credit inquiries – whether applicant has had recent hard or soft inquiries (may be applying for to many loans in a short time)
  • Collections – Any of their accounts in collections
  • Tenant credit score

It’s up to you to analyze the prospective tenants reports and determine if they are a good fit and pass the requirements for your rental property.  Always make sure you are following the Fair Housing Act Guidelines when it comes to tenant approval or rejection. 

What do you do after you run the credit and background checks?

If you’ve reviewed the credit and background checks for a tenant and decide to approve them for your rental property, next you’ll want to:

  1. Create a rental lease agreement – Preferably prepared by a legal professional.
  2. Notify the prospective tenant that their application was approved – Send with the lease agreement and ask for a security deposit.
  3. Review, Sign and date the lease agreement – Once landlord and tenant have signed the agreement, it becomes legally binding.
  4. Prepare for move in date and to collect your cash flow.

Rental Guys Property Management can help with any of these steps in your search for a qualified tenant.  Whether it’s tenant placement, only tenant screening, or full service property management in the Jacksonville FL area.