CREDIT REPORTS
Landlords are among the leading credit grantors yet they have often used hit or miss policies in protecting their valuable rental property investments. Being too hasty or too cautious to "rent it up" can cost the landlord much more than just the anticipated rents. The advent of tenant screening services (including credit reports, criminal reports, eviction searches, etc) has allowed rental property owners and managers to become pro-active in screening and selecting new tenants. By adopting and actively using credit tools, landlords and managers can help reduce risks associated with the screening process as well as protect property investments. Rental property owners and managers should:
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Establish a credit reporting relationship with an association or agency.
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Establish rental qualification standards and apply uniformly.
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Establish a policy of obtaining a credit report on every adult pre-qualified tenant applicant prior to signing a lease.
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Establish a record keeping system to monitor and comply with required federal and state guidelines for rental applicants and tenants.
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Establish procedures for knowledge and adherence to regulatory statutes for landlord-tenant laws and required documentation for landlord-tenant interaction.
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As a vital part of tenant screening, credit reports provide an objective source of data for screening decisions. While your rental application document may request personal references, employment data, and past landlord data, such information is provided by the applicant and must be verified against fraud before it can be accepted. Credit reports are the compilation of collected data from credit reporting agencies showing a pattern of payment.
Credit reports include personal information such as name, address, date of birth and Social Security Number. They also include historical data such as previous addresses, current and previous employers, and public records like bankruptcies, liens or judgments. Credit reports also contain credit card, mortgage and loan payment history.
Payment history is the important factor when reviewing the applicant's credit report. Customarily, the report covers the applicant's payment history for the last seven years. Factors such as missed payments or high balances may indicate how well the applicant may perform in meeting future obligations. However, certain past problems, such major medical bills and divorce ,may be taken into account and may be offset by other positive factors.
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