How to Identify and Screen Potential Tenants
Screening is required to assess a potential tenant’s credit. The difference between profit and loss is determined by how thoroughly potential renters are screened.
Here are some characteristics to look for in a potential tenant:
Financial Data such as credit cards and bank accounts, where the balances and minimum monthly payments offer you a picture of your financial health, are useful. High debts and monthly payments indicate a lack of ability to pay the rent on time.
The current income reveals if the rent and other living expenditures are paid.
To assess potential tenants, run a credit check.
A credit check entails obtaining a credit report through the landlord credit bureau, which records each person’s payment history for items such as auto loans, credit cards, school loans, mortgages, and other common obligations.
It also contains payment history with landlords, as well as any bad debts or bankruptcies reported by collection agencies. A credit report also includes a “Credit Score,” which is a numerical representation of a person’s credit and payment history based on an algorithm.
The credit score is displayed at the very top of the credit report. Many credit scores have a low number (such as 300) and a high number (such as 850). The higher the score, the less risky it is to lend money to this individual. Landlords in California are permitted to charge potential tenants up to $35 for a credit report and background check.
When you collect an application screening fee, you must give the prospect an itemized receipt. If a potential renter requests a copy of the credit report, you must comply with the law. Credit history is checked for seven to ten years. Request a credit report and score from one of the credit bureaus, such as Equifax Identity Report.
Here are some things to check for in your credit report:
Check your credit history for late payments, collections, charged-off credit card accounts, and bankruptcy. You may not be bothered by one or two late payments, but a pattern of late payments should raise red flags.
An applicant who has maxed out all of their credit cards, has large debts, or has a lot of overdue balances has a hard time paying their rent on time.
What to Do Before Performing a Credit Check
Before requesting a credit check on a possible renter by the landlord credit bureau, follow these procedures.
Fill out the rental application completely. Obtain a comprehensive rental application from your possible renter, which includes authorization to do a credit check. Make sure the person you’re hiring is at least 18 years old. Provide each candidate with an identical application form.
A declaration that you intend to do a credit check on the applicant must also be included on the form. Obtain the applicant’s signature and date on a consent form authorizing you to do a credit check.
Charge a credit check charge to each applicant, which covers the credit bureau credit report.