Some landlords and leasing agents have certain expectations of what a ‘tenant credit check ‘ contains. Furthermore, some landlords are not up to date on the nuances of the Fair Credit Reporting Act, either because they are new to the residential rental industry or perhaps because they have been in the industry for many years and assume things are just as they were 5 years ago. It’s vital that new landlords as well as veteran landlords and agents learn to navigate the ever-changing world of tenant screening.
First and most important, just because a landlord owns a rental property does not entitle him to view perspective tenants’ credit reports. In fact, the nation’s credit bureaus have made it quite difficult for independent rental owners and even small management companies to obtain in-depth credit report detail regarding an applicant’s consumer profile. To qualify for access to full credit reports, the landlord must provide extensive documentation (title, deed, mortgage bill, proof of ownership, tax documents etc.) and undergo an onsite inspection of their place of business. Many independent rental owners who operate out of their homes fail these inspections.
This is why many screening companies today offer a ‘credit evaluation’ or ‘credit decision’ instead. This means that the screening company will review the actual credit report themselves and only show the landlord a ‘risk level’ or an Accept or Reject decision. There are multiple benefits to this method:
• A credit evaluation does not require lengthy documentation or an onsite inspection from the landlord.
• Seasoned tenant screening companies have many years of experience evaluating past rental payment behavior as it’s applied to ‘scoring’ credit history. Their evaluations help take the guess work out of reading a full credit report.
• Using fixed credit ‘levels’ helps eliminate the risk of discriminatory litigation. For example, the landlord could reject all tenants with a ‘Serious Risk’ rating. On the other hand, a landlord who manually deciphers an entire unfiltered credit report must make his own decision as to how heavily he chooses to weigh a collection item of a 4-year old bankruptcy.
The bottom line is regardless of what type of credit information you prefer to get, make sure you understand what type of credit information your screening provider offers. In general, companies that don’t provide full credit reports have a much simpler sign-up process. Companies that provide detailed credit information will require a lengthy and thorough registration procedure including a mandatory onsite inspection.
We hope this post will help landlords be more informed when choosing a tenant screening provider.
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