84% of landlords say that their biggest worry when it comes to renting properties is payment issues.
There are many reasons why a tenant may have issues paying their rent - but wouldn't it be great if you could find out that this might be an issue before renting to them?
That's where credit checks come in. By looking into a potential tenant's credit report, you'll have a better idea of whether they'll be a responsible tenant.
With that in mind, keep reading to learn how to run a credit check on a tenant.
Collect the Tenant's Information
This is most often done through a rental application. To submit a rental application, a potential tenant needs to be at least 18 years old.
With the rental application, you'll be able to collect important information that's needed for the credit check, like the prospective tenant's full name, birth date, social security number, current employer, and current landlord.
It's best to use an online service or property management software for this step, as this is the applicant's personal information that should be dealt with carefully. These types of services will ensure the information stays protected and secure, so the prospective tenant has nothing to worry about.
Make sure you tell the potential tenant that you'll be running a credit check and have them authorize it before doing so.
Choose a Credit Report Provider
There are three main credit report providers: Equifax, Experian, and TransUnion.
If you choose to use Experian to generate the credit report, the applicant can buy the report and give access to multiple landlords to view it and get a copy.
With Equifax and TransUnion, similar options are available. The landlord can pay a fee to look at the credit report and then have the applicant pay for the costs (usually anywhere between $25 and $75) if desired.
While some services will show you the information immediately, others may take anywhere from 2-10 days to give you the credit check. So be patient!
Look for Key Information
Once you have the prospective tenant's credit report, there are a few key things to look for.
The first is the credit score. While a low score might seem worrisome, try to find out the reasoning behind a low score before jumping to conclusions. It may just be that the applicant is young and hasn't had the time to build up their score yet.
Pay special attention to warning signs like late payments, lots of debt, or derogatory marks. If you see something on the report that worries you, ask the applicant for more information about it. You can also ask them if it's all right to contact their previous landlord or current employer to find out more about their reliability.
How to Run a Credit Check on a Tenant: A Guide
A credit check is a good way to help find out if a potential tenant is right for your property. Now that you know how to run a credit check on a tenant, you're ready to make the process go as smoothly as possible.
Are you looking for help screening tenants or managing your investment properties in Chicago? Reach out to us today to find out what we can do for you.