How many of you use Credit reports when screening tenants

[bpleshek]

I was just curious.  I haven't been doing them and found that just having a conversation with them seems to indicate what type of person they are.  Combine that with 2 previous landlords, job, personal recommendations, bank records, etc.  Maybe i've been lucky.  Only had to evict once out of about 10 tenants and that was after a job loss/stop pay 9 months in.  Respond in comments if you want to tell me how naive I am.  I can take it.  What are the costs involved?

[Landlady]

The costs are nothing to you if you require the prospective tenant to cover the costs. I ask for $45 from each prospective tenant in order to cover the cost of doing a credit/background check. I'd suggest doing it. I've had about 20 tenants over the years and (knock on wood) no evictions or late payments. Your technique of chatting with a person is still valuable though, but trusting one's gut can be a slippery slope into housing discrimination no matter how unbiased we think we are.

[Evie]

I do not understand why someone would not run a credit and background check. That seems so incredibly reckless to me.  You put your property at risk. $45 is not so much money if you are renting in a decent neighborhood to quality tenants.  If you specialize in bad credit, rougher neighborhoods with unbanked tenants than I would understand, but why not give yourself the added tool? It's the only way I have discovered some people are behind on bills, or didn't pay some of them.

[bpleshek]

Maybe I was just being naive, but it seemed to me that anyone who was looking to rent, probably had bad credit anyway so I would be learning what I already knew.  I know that isn't always the case, but I'm charging much more for rent in my area than a mortgage would cost by roughly double.  Rents in my property areas go for 1200-1600 per month.  About 5 miles away rents are as low as 450/month.  Money in the bank and job info(45x salary) seemed to be more important.

I was actually afraid that asking for money to cover a credit report would be similar to the old "poll tax" that was considered to be discriminatory. 

So it's $45 to request then?  I'll start doing that.  Is one agency preferable to others?

Brian

[BrianT]

It depends.

Out in Los Angeles, always get the reports. There are a lot of fast talkers and fake personalities. If you understand your demographics well, the choice will be easy.

[TheGrimSqueaker]

Score and history when renting out a house or condo. History when renting out a lower end apartment. Neither when renting out a single room (but rental history, criminal checks, and due diligence are vital).

[Enigma]

I run a credit history, criminal background check, and eviction report on each prospective tenant.  I use Buildium as a tenant portal that allows me to run all the checks myself.  It also gives my tenants the ability to pay online or get their statements.  It may only be helpful if you have multiple tenants.

There was a recent situation where someone was trying to rent from me only to see their eviction report a mile long.  Some people know how to play the system.

Also evictions vary by location, I have properties in one county that require a certified letter processed for 30 days before you can set a court date, then a court date tends to be 30-45 days out from that.  After the court date the judge still gives the tenant 10 days to move.  If you fall for any excuses and delay sending a certified letter you are easily looking at 3 months.

All that aside, I don't expect a renter to pass a credit check as much as I would expect them to pass a evictions or criminal background check.

[Dicey]

Always.

[NoNonsenseLandlord]

Credit score is my main indicator.  It is color blind and 100% consistent.  I run my own credit reports, I NEVER let the tenant provide one.

A person can get a great LL reference by using relatives, friends, being such a bad tenant that the landlord gives a great reference, etc.  A person can avoid a criminal record by not getting caught.  A person has to live in a civilized manner in order to get a good credit score.

Understand credit score distributions so you know what is a good score and a bad one.

[adamcollin]

Credit report is an essential element of tenant screening. I always verify it when renting my home.

[NoNonsenseLandlord]

Credit report is an essential element of tenant screening. I always verify it when renting my home.

You can also verify the past addresses on the report with past addresses on the application.  And you can call the property owners, not the application references by referencing the county records.

You can see if there are any 'extra' addresses that may have been an eviction or a lease termination.  You can see if they move too often. You can see if they skip out on small bills, or are hurt by medical bills.

There are lots of great information in a credit report.

[bpleshek]

Where do you do the criminal background check?  Is it a particular service or do you just go down to the sheriff's office?

Brian

[NoNonsenseLandlord]

Where do you do the criminal background check?  Is it a particular service or do you just go down to the sheriff's office?

Brian

My company does it for me.  mccgrp.com.  Others do it too.  You can do some yourself, as a preliminary measure, by doing a courthouse search.  In MN, I get more information when I am physically at the courthouse than from getting the info from home.

A solid background check company will do a county search, not a nationwide search.

[Enigma]

Where do you do the criminal background check?  Is it a particular service or do you just go down to the sheriff's office? Brian

I use a variant of Transunion Smartmove.  With it I can run all three checks (credit history/score, eviction report, criminal report)  Should be able to search for it.

[jp_b]

Yeah I use TransUnion MySmartMove too and it's been great the last two years.  Super simple to setup and the tenant pays for the cost of the reports.  Highly recommend. 

[Cathy]

You can see if there are any 'extra' addresses that may have been an eviction or a lease termination.

"Extra" addresses on a credit report might represent an eviction or lease termination, but they also might represent addresses where the prospective tenant has never lived and are simply associated with accounts on which the prospective tenant is an authorised user. It would be a mistake to draw an adverse inference from addresses on a credit report which were not disclosed on the rental application. The prospective tenant might not even be aware that those addresses on the report, or even if he or she is aware, it might impossible to remove them because of the association with the authorised user accounts, even though the prospective tenant has never lived at those addresses.

[rachael talcott]

I often turn away 99 people with bad credit before I find the one with decent credit.  I screen initially via email and ask them to tell me about their credit history.  If that sounds okay I show them the property, and if they apply, I run their credit.  A surprising number lie to get to that initial showing. 

Experian did an analysis of lease defaults and found that 18% of those in the 500's defaulted, while only 2% of those in the 700's defaulted.  An eviction in my state means 3 months lost rent plus legal fees. 

http://www.experian.com/assets/rentbureau/white-papers/experian-rentbureau-rental-history-analysis.pdf

[NoNonsenseLandlord]

"Extra" addresses on a credit report might represent an eviction or lease termination, but they also might represent addresses where the prospective tenant has never lived and are simply associated with accounts on which the prospective tenant is an authorized user. It would be a mistake to draw an adverse inference from addresses on a credit report which were not disclosed on the rental application. The prospective tenant might not even be aware that those addresses on the report, or even if he or she is aware, it might impossible to remove them because of the association with the authorised user accounts, even though the prospective tenant has never lived at those addresses.

Very true, but they are red flags. Most people only have the actual addresses where they lived on their credit report.  The addresses are not a pass/fail indicator, but a thing to look at in the entirety of the background check.

[Goldielocks]

Maybe I was just being naive, but it seemed to me that anyone who was looking to rent, probably had bad credit anyway so I would be learning what I already knew.  I know that isn't always the case, but I'm charging much more for rent in my area than a mortgage would cost by roughly double.  Rents in my property areas go for 1200-1600 per month.  About 5 miles away rents are as low as 450/month.  Money in the bank and job info(45x salary) seemed to be more important.

I was actually afraid that asking for money to cover a credit report would be similar to the old "poll tax" that was considered to be discriminatory. 

So it's $45 to request then?  I'll start doing that.  Is one agency preferable to others?

Brian

You are just asking for trouble, if you charge more than it costs to buy, and a lot more rent than neighboring areas.  And no credit report....  Just who is trying to rent from you, anyway, and why?

I would guess that fewer than 1 in 10 working applicants are truly "problem" tenants, anyway.   

[Enigma]

I often turn away 99 people with bad credit before I find the one with decent credit.

If a renter had decent or excellent credit, why wouldn't they buy?  I have accepted many people with questionable credit and tend to have a larger security deposit (two months rent) which will cover the amount of time for an eviction if necessary (30-45days).  But everyone is a case-by-case basis with all the information I have on them.  Application, credit, eviction report, and criminal report.  I think my pool of renters tends to be 6 people before I find one that feels 'right'.

[Papa bear]

I often turn away 99 people with bad credit before I find the one with decent credit.

If a renter had decent or excellent credit, why wouldn't they buy?  I have accepted many people with questionable credit and tend to have a larger security deposit (two months rent) which will cover the amount of time for an eviction if necessary (30-45days).  But everyone is a case-by-case basis with all the information I have on them.  Application, credit, eviction report, and criminal report.  I think my pool of renters tends to be 6 people before I find one that feels 'right'.

There are hundreds of reasons people will rent instead of buying with good credit:

Moving to a new area and getting to know it first
One spouse relocating for work
Temporary work engagement
Primary residence not habitable
  Fire damage
  Storm damage
  Remodel
  Still under construction
Residence sold before new purchase
Anticipating a move in under 3 years
Not having saved a down payment
Hates maintenance
Just don't want to
Etc.

Also in my jurisdiction, any deposit greater than one month is deemed excessive and the LL will owe interest back on the entire deposit amount.

I rent to students so I do not check credit.  I do require, however, cosigners, and each tenant and cosigner is jointly and severably liable for the entirety of the lease and thus the rent.



Sent from my iPhone using Tapatalk

[Another Reader]

My two best tenants were a single military guy and a French Canadian post-doc and his wife.  Both were only going to be there for a few years.  Not everyone that can buy, does.

[Enigma]

I agree there are a ton of reasons someone wouldn't buy.  As for Tennessee the state and most counties do not have a cap on the security deposit.