Most property managers and landlords understand why it is critical to run a tenant screening report, determining a potential tenant’s credit is only part of the process though, as a credit report only shows the likelihood of a tenant paying their rent on time, it does not really give a clear picture of whether the prospect will be a good tenant. Running a full package with credit and background check is a must if you want to get the full picture of the potential tenant. All Landlords/managers have their parameters of what type of tenant they are looking for, below are a few warning signs to be aware of before you execute a lease.
1. Payment History
Late payments are a HUGE red flag — be sure to see if they have a track record of late payments or if there was a short amount of time they had an issue and if there was only a short time of late payments be sure to find out why.
2. Financial Stability
You should look out to see if they have a history of on-time payments, as well as if they have applied for a large amount of credit lately. Also, be aware of the amount of debt they currently have and how much of their total credit has been tapped.
Not all debt is the same so be sure to evaluate the type of debt depending on the source you received the information from.
A Landlord/Manager obviously does not like to see a bankruptcy but if it has been discharged you may be ok with looking at their more recent credit history and how they have performed in rebuilding their credit.
If you find a judgement from a previous Landlord/Manager it may be wise to discuss with them as well as the potential tenant about what happened before you make your decision.
5. Criminal Convictions
While a past criminal record should not necessarily limit anyone from housing be sure to see detailed information about the previous incident(s). You as a landlord/manager have a responsibility to the rest of your tenants as well as your property. Always confirm the report includes the at least a national database as well as a sex offender database.
6. Previous Rental History
Try to verify an applicant’s previous rental history by calling their last two landlords and checking a rental history database. Be wary of a current landlord reference, as some landlords may paint a prettier picture to get rid of a problematic tenant. Lastly, when calling the landlord, ask them details of their rent, when they moved in, how much they are paying etc… all the details should match what is on the application, or you may not be talking to the real landlord.
There will always be some risk in choosing a tenant to live in your property, but by having the applicant’s credit, criminal and eviction history you will be able to make a much more informed decision since you will be able to evaluate the risk a lot better. There is always the option to negotiate the lease amount or security deposits according to their credit information, larger deposit or higher rents may be something to consider as you negotiate.