Looking to screen potential tenants for your rental properties? The key to choosing quality tenants lies in your tenant credit check, which contains the information you need to make the best decision for your property.

A tenant credit report demonstrates the renter’s creditworthiness and history of timely payments. By taking the time to check tenant credit, you gain information about potential financial problems or concerns that might be red flags against an applicant.

The American Apartment Owners Association makes it easy to run tenant credit checks as part of your overall credit screening process. ​​

 

What Are Tenant Credit Checks?

A tenant credit check shows the potential tenant’s credit score as well as details about their recent credit history, including instances of non-payment or delinquencies. A rental credit check is run by landlords to screen potential renters who have financial or personal problems.

Landlord credit checks allow you to have a clear picture of the potential tenant’s full financial status and reliability before you sign a lease. As such, they protect you from getting into a legally binding agreement with someone incapable of holding up their end of the bargain via timely rent payments.

Since the tenant credit check shows the renter’s income and his or her debts, you can make an informed decision about whether or not the renter can afford your apartment. It’s generally accepted that rent should constitute no more than one-third of your expenses per month.

If you learn that your tenant has a high debt-to-income ratio, or that your rent would constitute greater than one-third of their income, it’s in everyone’s interest you deny this person’s application. When a renter is unable to afford an apartment, they may fall behind on other payments (such as a car loan) to make rent, or slowly fall behind on the rent.

Why Should a Landlord Run a Tenant Credit Check?

Checking credit for renters does mean extra work for you as the landlord. If you have a lot of empty apartments to fill, you may be tempted to skip a credit check for a friend of a friend or someone who seems trustworthy.

Unfortunately, these assumptions can cost you. If you skip a credit check, you could wind up with a tenant who has a track record of missed payments or who is struggling with credit card balances. Or you could end up with a tenant who has a criminal history, and who threatens the safety of residents in your multifamily unit. Is this a risk you’re willing to take?

Although a tenant credit check requires additional steps, AAOA works with you to streamline the process and make it easier than ever to effectively screen potential tenants.

How to Run a Credit Check on a Tenant

We often get asked how to run a credit check for a prospective tenant. While the process may seem overwhelming at first, it’s really quite simple. Below we break it down in three easy steps:

• Step 1: Join AAOA. Registration is quick and easy so you can get started today! Our free membership is always 100% free, with no credit card required.
• Step 2: Use a rental application with a signature release. While many credit check services may not require a signed release, you should obtain one. AAOA’s free rental application form includes the proper language and space to collect the tenant’s signature.
• Step 3: Order a Credit Report for Landlords. AAOA offers two methods to obtain a tenant background check. The first is tenant cooperation — after placing your order, the tenant will receive an email with a unique link. The link will take them to a secure website to confirm their identity. Once completed you will receive an email notification to view the tenant credit report within your account. The second method is to become underwritten. This requires an additional fee, documentation and to pass an onsite physical inspection. Underwriting is recommended for AAOA members who have at least 10 rental units. Learn how it works.

Now that you’ve learned how to do a credit check, the next step would be to select the right tenant and have them sign a lease agreement.

As a landlord, you’ll often find renters that have problems pop up on their credit reports. This may sometimes even be the reason they’re renting — their credit may not allow them to buy a house. However, this doesn’t necessarily make them a poor tenant choice.

A renter’s credit check will show you some of the details about their credit history, allowing you to see if the prospective tenant has made wise financial decisions in recent months. As you look through this information, some items to keep an eye out for include:

• Late payment or non-payment
• High debt-to-income ratio
• Gaps in employment history or income
• Insufficient income to afford rent
• Criminal convictions
• Prior eviction

If you spot any of these red flags, decide whether you feel comfortable proceeding. You might opt not to take a chance on a renter with an arrest record or outstanding debts when a qualified applicant is interested. You can also decide to ask the renter a few questions to determine if problems — like bankruptcies or a period of delinquency — were due to unexpected financial situations that have since been rectified. 

Ultimately, landlord credit checks make the process transparent for the renter and you by painting the bigger picture, so you will be more informed and able to make better decisions about your rentals.

​​Why Choose AAOA’s Services?

AAOA’s tenant screening services address the needs of landlords, property managers, real estate agents and others by providing:

• All major credit bureaus, including Experian, Equifax and TransUnion.
• Up-to-date records and new resources to help choose the right tenant.
• A site with proven security measures for the utmost in consumer data protection.
• The best US-based customer support and service through our toll free number 866.579.2262.
• No fee membership through our Free Membership account.
• Additional savings for AAOA members when ordering a tenant background or other product.
• 24/7 access to request, order, find and view tenant credit checks within each member’s account.

Join AAOA and begin enjoying the benefits instantly!