Why get a credit report on prospective tenants/applicants?

Private credit reporting agencies collect and sell credit files and other information about tenants. Landlords should always check a prospective tenant’s credit history with at least one credit reporting agency to see how responsible the person is in managing money. The report will also help to verify that the applicant is actually who they say they are. Landlords must also be leery of applicants with lots of debts—this clearly includes people whose monthly payments plus the rent obligation will exceed 40% of their after-tax income. The person’s bill-paying habits, lawsuits and evictions are also very important information to have before you make a decision to turn over a valuable asset to a stranger. A credit report contains a great deal of important information on a prospective tenant and usually covers the previous seven to ten years. You can find out, for example, if the applicant has a history of paying bills late, civil judgments against them, has gone through bankruptcy, how much they owe, their monthly financial obligations and often learn if the applicant has been evicted. The report may also provide a previous address and current place of employment. If you do not rent to someone because of negative information in a credit report, or you charge someone a higher rent because of such information, you must give the prospective tenant the name and address of the agency that reported the negative information. This is a requirement of the federal Fair Credit Reporting Act. (15 U.S. Code §~ 1681 and following.) You must also tell the person that he has a right to obtain a copy of the file from the agency that reported the negative information, by requesting it within 60 days. Sometimes, your only choice is to rent to someone with poor or fair credit—or even no credit (for example, a student or recent graduate). If that’s your situation, you should still adopt sensible screening requirements that may include: * Positive references from previous landlords and employers * A credit worthy cosigner or guarantor on the lease

Criminal History

We strongly recommend checking for criminal and sex offender history before renting to anyone. It may be cost prohibitive to check all applicants however, it makes sense to check someone before making a final decision to rent to the individual.

Many applicants will be eliminated by their credit report and rental history alone. Therefore you can save money by not checking everyone. After you have initially screened the prospective applicants rental and credit history the remaining applicants you are considering should be screened by criminal history and sex offender information.

Never enter into a business relationship with anyone before checking their background. Your life and or financial livelyhood could depend on it!

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