My biggest piece of advice as a landlord, one that I follow religiously as a experienced aka jaded landlord, when screening tenants, is that no one is perfect and we all have baggage. There is a reason why your tenant is renting and not buying. The key is to figure out that reason, what baggage it brings and decide if it is or is not acceptable to you as a landlord.
Personally, I am am fine with bankruptcy and short sales up to a point. The key for ME is finding out if it will impact a tenant’s ability to pay the rent. If it does not effect their financial stability; then I am fine with it.
So how do I go about figuring all this out? I learned how to read a background check and credit report. This helps me figure out if I should approve a tenant or not. Since reading a background check or credit report can be difficult here are 5 ways to start!
5 Tips on How to Read a Background Check and Credit Report
1. Don’t worry about the recommendation. Look at the score.
You don’t need to care about the recommendation that the screening provides, you need to care about the score. While I have never approved a candidate that wasn’t approved on their background check, I haven’t always approved some candidates that were “approved” on these checks either.
2. Don’t dwell on the credit score; care about the “guts.”
Similar to my point above, the credit score can be very misleading. I have seen people who have tons of late fees, high balances, and more-, things that disqualify them in my mind. On the other hand per the system they have a great credit score. I have also seen others who just haven’t had a lot of bills. While I have not approved those with high credit scores, to date I have never approved a tenant with a score a low credit score (below 500)
3. Look at the late payment.
When reading the score you want to look at how many time they have been late on a payment or not paid at all.
4. Look at how much credit they have out.
If their credit card is maxed that would be a red flag and I would ask questions. While sometimes it is for a direct reason such as an 0% interest card, other times it means that one of those “issues” could cause the whole deck of cards to fall.
5. Review the background check in detail.
I have been finding that auto tickets are popping up on the background check. So make sure you look at all of it in detail and not missing anything.
So review your findings. If it is an eviction or something that is going on currently, I will not rent to them. If it is something older and it won’t impact their ability to pay then I am okay with it. The key is to figure out what your lines are ahead of time so you can apply your policy equally across the board and not have trouble with fair housing laws.
Looking for a great background and credit check company?
I personally use and love Cozy.
They tons of great features (application, marketing, rent collection) are easy to use and best of all they charge the applicant so there is no cost financial cost to myself.
What has been your experience with reading background checks and credit reports? Do you have any tips?6