Tenant Credit Report and Rent Collection
Doing a tenant credit report is extremely important when deciding if you should rent to a tenant. It shouldn’t be the only criteria for making a decision, you should always thoroughly verify other sources. Even then, nothing is guaranteed. There are many cases where landlords conduct an extensive tenant credit report on all applicants and sign the lease with the best candidate. Then, sadly, they have trouble collecting the rent on time and are baffled as to why since the results of the tenant credit report were positive.
One important thing to keep in mind about tenant credit report is that they do not include a person’s history of rental payments. So while you may be able to verify if a person pays their credit cards and loans on time, you still don’t really know how they pay their rent. Tenant credit reports are an excellent tool for gauging what someone’s general financial debt is so that you can determine a debt to income ratio. This is why it is important to contact previous landlords as a reference and to verify the applicant’s rental payment history. Don’t use the tenant credit report as your only tool.
We’ll keep our fingers crossed and hope that all tenants you approve are model tenants who never cause any headaches. But for the sake of disseminating important information, let’s briefly assume that you fall into the example above where you approved a person with good credit who is now paying late. You may have some options. There is a relatively new product specifically designed for landlords. The bureaus are now beginning to collect rental payment patterns from landlord and reporting them on to the tenant’s credit check (report). This is a new service and not all tenant screening companies offer it. Contact your tenant screening company to find out if this is a service they offer. This service, however, is not free to landlord but it may be worth the cost to reflect negative information on your tenant’s so that their credit is somewhat affected. This may serve as an incentive for your tenant to pay the rent on time—since their payment history will appear on future tenant credit report. At the very least, if your tenant has already defaulted, it can serve as warning for future landlords, making it a little more difficult for bad tenants to keep scamming landlords.