West Hills Property Manager
Steps to Take Before Running a Credit Report
While the websites you use may differ in the process of running the credit check, there are a couple general steps you must first take:
- Obtain a Complete Rental Application and Permission to Run a Credit Check From Each Tenant 18 Years or Older. Provide a pre-printed form for each tenant to complete to gather his or her full name, birth date, Social Security number, previous address, and landlord contact information for the past two years. The form should also include a statement that says you plan to run a credit check on the tenant, as well as a signature line where the tenant signs as consent to allow you to run a credit check.
- Collect a Credit Check Fee From Potential Tenants. Charge the prospective tenants a fee for running a credit check. This covers the fee you have to pay for requesting the credit report from the bureaus or credit check websites.
What to Look for on the Credit Report
Once you have a credit report, review the various sections for potential red flags:
- Negative or Potentially Negative Items Section. This is typically on the first page of the credit report. You can find any accounts that are past due, discharged, or in collections in this section.
- Bankruptcy, Eviction, or Foreclosure on a Home. These negative marks can be found in the negative items section of the report. You can also find these indications next to the account that it pertains to in the itemized list of accounts on the subsequent pages of the credit report.
- Individual Credit Accounts and Loans. You can review each account for late payments. The report lists if the account is current and – if there were any late payments – how many times the account was paid late. Additionally, the report lists how late the payments were, such as 30 days, 60 days, or 90 days delinquent.
How to Tell a Good Tenant From a Bad One
Past behavior tends to predict future behavior. If tenants have a history of not paying their bills or continuously paying their bills late, it is likely that this behavior will continue in the future – meaning that rent payments will be late or missed.
On the other hand, people do change. If the late payments or non-payments are old and the tenant has been paying bills on time since the negative item or items, then it is possible that it was a one-time mistake or that they are working to correct their behavior.
For example, someone who filed for bankruptcy five years ago but has since established new credit and consistently paid their bills on time is an example of someone who has a blemish on their credit report but can still be a good tenant. A tenant who has a home foreclosure or who has one or more collection accounts from past landlords is a different story. This is a potential tenant you may want to avoid.
Final Word
Remember, in addition to running credit checks, you can also contact the previous landlords to screen tenants. Verify the dates of occupation by the tenant, the monthly rental fee, payments from the tenants, and any problems the landlord had with the tenants.
Knowing how to run your own credit checks can save you a lot of time and money, and potentially protect you from damages. By running a thorough check, you can ensure that you only rent to tenants who will care for your home and make on-time payments.
From: https://www.moneycrashers.com
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