Conducting proper background checks on prospective tenants is an important part of most landlords’ and property managers’ job. Conducting a proper background check can prevent a problematic or difficult tenant from ever leasing one of your rental units which will save you time and money in the long run. One important aspect of a proper prospective tenant background check is a credit check. Conducting credit checks on prospective tenants helps landlords determine if tenants are responsible with their money and if they pay their bills on time. In fact, someone may have poor credit because he or she may have previously failed to pay his or her rent on time and their previous landlord reported them. In addition, someone with a history of poor credit is more likely than someone with good credit to have trouble paying rent on time and therefore is not the ideal tenant.
Conducting a credit check on a potential tenant can give you very important and helpful information. However, before you can run a credit check, you will need the person’s name, address, social security number or individual taxpayer identification number. When a tenant completes a rental application with a landlord or property manager, this information should be included in the application as well as consent to conduct the credit check on the individual. Also, it is a widespread practice to include the fee for conducting the credit check within the rental application.
Once you have the necessary information, you can purchase credit reports on the potential tenants from Equifax, Transunion or Experian by using a tenant screening service. Once you run the prospective tenant’s credit, you should be able to see a lot of information about their previous financial decisions including:
If the prospective tenant was convicted of a crime or in some states even arrested
If they were late or failed to pay bills including car payments, student loans or rent
If they have been evicted
Involved in a lawsuit or personal injury claim
Alternatively, do not have much of a credit history
Whenever you conduct a credit check on a potential tenant, it is important that you follow federal, state and local laws. For example, according to the Fair Credit Reporting Act if you do not rent your property to someone or you charge a higher rent as a result of information found in their credit report then you need to give the prospective tenant the name and address of the agency that reported the information. Also, different states have rules on how large a fee you can charge tenants for screening them and whether you need to itemize the fees.
If you are a property owner with multiple units the tenant screening process alone can take up much of your time if you are not organized. You can instantly reduce the hassle and paperwork of managing rental properties with proven property management software. RIS safe and effective property management system enables landlords to run credit reports over the internet on prospective tenants which is only one of the many amazing features RIS lease management software has to offer.
This post is provided by RISSOFT Residential and Commercial Property Management Software, specializing in innovative and cutting-edge property management software for all 50 states. Request a demo or contact us today to receive more information.
Disclaimer: The information provided in this post not intended to be construed as legal advice, nor should it be considered a substitute for obtaining individual legal counsel or consulting your local, state, federal or provincial tenancy laws.