In order to run a credit report on an individual, first you must have a signed application stating that the applicant agrees that the Landlord, Manager, or Agent can obtain a credit report. The application should contain at least their social security number, a birth date, and a current address. Even in this time of economic depression and era of bad debts, credit checks still play an important role in screening tenants. The score is just one of many facets of a credit check that management uses to determine whether or not a tenant can afford to rent a property they manage, but there is more to it then just a score. The scores of credit reports will vary between 400 and 850. A score of 700 or above shows that an individual has been trusted with credit and has made good on repayment of borrowed money. A score between 600 and 700 generally can be evaluated to determine the cause of the lower score, but the individual may still be a good tenant. A score below 600 generally is a warning that they have not been diligent with their money, but this may be due to a bad mortgage or major medical or education bills so further investigation is definitely needed if you think you might want to rent your house to them. Anyone with a score below 500 has had serious problems over a long span of time and the credit check should be accompanied by an eviction check. If you feel further investigation is necessary, a lot of information about an individuals history can be found on a credit report. Variations of information are also provided in most reports. In the “Variations” portion of a credit report, you will see any variation in personal information, address comparisons, and employment comparisons. Your application should ask for current and the previous address and these should match. There is also an area where employment history is stated and this should also be a question on an application and at least the last employer should be listed on the credit report, maybe not the current one if it is a new job. A credit history shows when the credit account was opened, what the current balance is, what the past due amount is ($0) and whether or not the individual has been late on payments. This will show as the number of times the payment was received either 30 60 or 90 days late. The present status of the account has many different possibilities;
AS AGREED Great Payment is being received on time
PD WAS 30 OK Payment has been 30 days late
PD WAS 60 OK Payment has been 60 days late
PD WAS 90 Not that OK Payment has been 90 days late
PD WAS 120+ Bad Payment was delayed more than 120 days
PAID CHGOFF Bad Went to collections
PAID COLL Bad/OK Paid collections
COLLECTION Bad In collection with no payment
BANKRUPCY Worst In Bankruptcy – no payment received
A credit score is not always the be all and end all of tenant screening but may help in verifying whether a tenant is being honest. You can find their last current address, where they have worked, and whether they have a good history in being timely with payments. If you have a good feeling about a tenant then it may be worth giving them a shot. Also, if the tenant was up front and open about their credit situation, they may be worth further investigation. They may also be willing to put up additional security deposit for the opportunity to rent your home or provide a guarantor or co-signer. One landlord tip: check the owner of the properties they previously rented is the same as those listed on the application (they could just be “friends”)
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