Rentals 101: Credit Check

A popular wise saying states “those who do not remember the past are doomed to repeat it.” A landlord that does not examine a possible tenant’s credit report is doomed to renting to somebody they must not have. Because of this, landlords should run credit checks on prospective tenants. Landlords can pay six figures for a home that they will lease to individuals. Before you give the keys on your rental property over to a renter, shouldn’t you at the very least know something about the person who is going to be renting your property?

A credit report can be described as snapshot of a person’s financial history during the time the report is run. It supplies a crowd of information that a landlord can make use of to evaluate whether to rent to a potential renter. Even though a credit report just isn’t an ideal indicator of whether or not the occupant will at all times pay her or his rent on time, it is definitely better than having no information on the tenant.

A credit report displays how well or how poor a possible renter has sustained their financial obligations. If ever the tenant is known for a history of buying something and then having the account fall down into collections, this are going to be mirrored in the report. However if ever the renter consistently pays his bills on time each month, this will be reflected inside the report. If the possible tenant fails to pay his bills, would you wish him or her living in your house? If they do not pay their VISA bill there’s a very high probability they will not be paying their rent someday.

A credit report will also inform you if the potential renter has a large number of charge-offs or collections on their report. A charge-off happens when a business isn’t paid what they’re due and they surrender on trying to ever collecting that money. A collection is when the company is actively trying to gather the money they are owed. Once there’s a load of collections and/or charge-offs, this informs you that the tenant has problems paying out their bills. Why would you wish someone like that person leasing your house?

The last thing a credit reports exhibits is whether there are actually some judgments against the tenant or whether they have ever filed for bankruptcy. Once someone files bankruptcy it is usually for the reason that they have accumulated more debt than they can handle which leaves them no choice but to file for bankruptcy. Landlords don’t wish to have someone who’s unable to handle their finances of their property.

Credit reports are not precise in trying to determine whether or not an applicant would be a good tenant. Credit reports do tell you something regarding the financial accountability or irresponsibility of the applicant. It’s that history that you utilize to evaluate whether to rent to an applicant. Not knowing that history, in the future you would be doomed to being yet another collection on their credit report.

Another great article by Calgary Traditional Home Builder Free reprint avaialable from: Rentals 101: Credit Check.