A Credit Report is Not Enough

Many people think tenant screening means only obtaining a current credit report. Credit information is important and in today’s rental market, they contain more details than ever before. There are continual changes to the Fair Credit Reporting Act, FCRA, because landlords, employers, and businesses consider credit ratings a valuable resource.

Then why is a credit report not enough? Running a credit history and relying on just one area for approving an applicant is simply not thorough enough. A credit report just does not give you all the information you need to make a decision about a prospective tenant. To make the most informed and educated decision about the person you are considering you need several sources to give you a “complete picture”.

As a professional Property Manager our process starts with our comprehensive Tenant Application. This gives us written permission to obtain a credit report, which is an important part of the Fair Credit Reporting Act. Without this authorization, property owners are liable for illegally obtaining credit information.

The applicant must also provide us with the following information needed to determine their qualifications:

  • Rental history or ownership – how have they taken care of past properties?
  • Proof of income – Does it support the monthly rent and utilities in addition to current expenses?
  • Personal References

Cross referencing the information on the credit report to the information on the application is very important.

  • Does the credit report reflect the same addresses as the applicant listed on the application? This is important to assist in detecting additional residences that the applicant may not have included due to a poor rental history or a recent eviction not yet reflected in the screening process.
  • oes the credit report show any conflicting information on employment or income?
  • Does the credit report reflect the correct birth date and social security number?
  • Does the credit report reflect a bankruptcy, eviction, or payment problems that the tenant has failed to disclose?

A credit report sometimes reflects the name of the employer but does not always show reliable income details. Requiring “verifiable” written documentation for income such as W-2’s, tax statements, and other sources of proof is a way to obtain this documentation as well as calling for verbal verifications. In addition, a credit report will not show many other types of income, such as trusts, investments, government assistance, and more.

Credit reports do not verify ownership of a property listed or details of rental history. County records should be used to verify if the applicant has listed the correct property owner. Verbal or written inquiries are necessary to learn how the applicant maintains the property, reveal undisclosed pets, and pays the rent. Not all credit reports will report evictions. We use a service that specifically checks for unlawful detainers or evictions. The application can also reveal discrepancies or warning signs. For example, does the landlord or employer also show up as a personal reference or relative? This requires careful investigation to ensure that they are giving accurate information.

The bottom line is that credit reports ARE important. The reports do reflect the applicant’s history of how they handle their credit, which is an important key in any application. However, they do not provide enough information to determine if an applicant is qualified to rent and maintain the property. Therefore, as your property management company, we use both a detailed application and a thorough tenant screening process to determine who will reside in your property.

To learn more about our property management services please click here.

Leave a reply

REAL ESTATE EIGHT THREE ONE
4510 Capitola Rd. Capitola, CA 95010
DRE# 01526597 / 831.475.5695 / RE831.com