In order to ensure you rent your property to the best possible tenants, you should perform credit checks on anyone who applies for rent. Credit checks inform the landlord of what to expect from prospective tenants and equip them with the information necessary to protect their investment.
Consistency is necessary to ensure any potential tenant has positive financial trends. Landlords should look for consistent payment history on cars, previous rent payments, and credit card bills. Landlords should also look for employment stability. Tenants with stable employment history with the same or a few employers indicates consistency. A tenant who bounces from job to job can not be relied upon to pay their rent on time or at all. The objective is to predict the behavior of your prospective tenants.
Landlords can check the credit report to determine if money is owed to previous landlords and to gauge the overall nature of the tenants rental history. A tenant who has bounced around between multiple rental properties isn’t necessarily indicative of a poor tenant, nevertheless the landlord needs to inquire about the reasons why they have moved so many times. The rental history also gives a brief overview of the types and cost of previous properties the tenant has lived in.
Cars, credit cards, and any other debts that will eat into the tenants ability to pay their rent on time each month should be considered. Compare their debt to income ratio and determine if the potential tenant can afford to rent at your property.
Checking the three major credit scores (Equifax, Experian and Transunion) of tenants gives landlords a broad overview of their credit history. Inquire about their remaining open accounts and look into the accounts the tenant has paid off. Paid accounts offer a glimpse into the types of debts the tenant has successfully handled and may choose to take on in the future.
Talk to the tenants previous landlord. If the tenant refuses to allow contact, consider it a red-flag and make sure everything else checks out before you consider renting to them. Additionally, you can get online credit checks at MrLandlord.com. Last but not least, keep notes on all your tenants. If you were to end up in court, being able to site dates and times will carry more weight than hear-say.