One of the most important considerations when reviewing a potential tenant’s application is their credit history. Their past financial behavior is a good indicator of their future financial behavior -- their credit report will give you an idea of their ability and willingness to pay their debts on time.
As always, you must abide by federal and state regulations in your dealings with applicants and tenants. It is your responsibility as a landlord to familiarize yourself with the federal Fair Credit Reporting Act and Fair Housing Act, as well as your state’s consumer reporting and fair housing laws.
There are a few different ways for an independent landlord to check an applicant’s credit history. The option that works best for you largely depends on how often you screen. Let’s take a look at 3 ways you can access a tenant’s credit report.
1) Use a screening service that offers a credit “push”
The easiest way for many landlords to view a tenant’s credit is through an online tenant screening service, such as SmartMove, that uses a credit “push”instead of a credit “pull”.
To begin, you’ll want to know exactly what is meant by a credit “push.” With a credit push, the renter authorizes access to their own credit report and then “pushes” it to the landlord. In the case of SmartMove, this results in a soft inquiry on the applicant’s credit report which doesn’t impact the calculation of certain credit scores such as ResidentScore.
SmartMove is a great option for smaller landlords since it does not require that the landlord agree to an on-site inspection. In addition, the tenant can submit his or her personal identifying information directly to SmartMove, so the landlord does not have to collect it. All you need to start screening is the renter’s email address and the results are received within minutes of the tenant authorizing access to the report.
There are several benefits of this method for the independent landlord. The benefits of using SmartMove include:
- Start right away – all you need is the renter’s email address
- No setup fees, minimums, or subscriptions
- No need to collect the applicant’s social security number
- Gain access to full credit, criminal and eviction reports
The credit push process is fairly straightforward. While the process may vary somewhat depending on the screening service you use, SmartMove typically works like this:
- Setup a free account.
- Enter the applicant’s email address into the system.
- The applicant receives an email inviting them to login to SmartMove and provide information to verify his or her identity.
- Once the applicant successfully verifies his or her identity, the reports are emailed directly to the landlord.
2) Access reports directly from a credit bureau
If you have a large number of rentals and are frequently checking credit reports, you may choose to access tenant credit reports directly from a credit bureau.
Often, credit bureaus will require a credentialing process that can include a site inspection, verification of your identity, investigation of the nature of your business, and your practices for receiving and storing sensitive information.
This process is often less than ideal for the independent landlord. The site inspection process can be laborious and takes a good deal of time to complete without any guarantee that you’ll be approved. In some cases you may have to pay a fee for the inspection. Additionally, if you are pulling a credit report from a bureau you may still need to pull criminal and eviction reports separately.
3) The applicant provides their own credit report
Tenants who are applying at multiple rentals may request to pull their own credit report from a site such as AnnualCreditReport.com and provide the landlord with a copy.
Some landlords prefer this option because it requires the least amount of work for them. However, it has the potential to be the least accurate method.First of all, since tenants can only obtain one free copy of their credit report from each credit bureau annually, the information may be outdated. Secondly, when you trust an applicant to provide their own credit report, an applicant could potentially digitally alter their credit report through image-altering software or otherwise manipulate the information before presenting it to the landlord.
The most accurate option is obtain the report directly from a credit bureau or tenant screening service that is subject to the FCRA’s reasonable accuracy requirement.
Choose the Best Option for You
For independent landlords who do a few screenings a year, your best option is often to use a tenant screening service such as SmartMove that will push the applicant’s credit report to you. This option allows you to start screening quickly and often without an on-site inspection. It is pay-per-use so you only pay when you need it.
Landlords who screen frequently may find that getting credentialed to pull credit is a more convenient option for them. This method may allow them to receive credit reports more quickly since they can pull the report directly from the bureau without having the applicant login to verify his or her identity.
No matter which option you choose, it is essential to check a prospective tenant’s credit history prior to renting to them. A full tenant screening should also include an eviction report and a criminal background check. This will give you a more complete view of your prospective tenant, allowing you to find the best possible fit for your property. SmartMove’s online tenant screening , including a ResidentScore and leasing recommendations can help you make more informed decisions about applicants in minutes.