Your tenant screening process may be the most important part of leasing your San Ramon rental property. Choosing a good tenant will impact your entire experience and help you earn more on your investment.
During the screening process, most rental property owners start with a credit check. This is a good idea, because checking credit can give you an idea of a prospective tenant’s overall financial health. It can also verify the information that’s on the rental application. If you notice an address in the credit report that isn’t listed on the application, the tenant could be trying to hide a bad rental experience or a messy landlord dispute. You’ll want to dig a little deeper.
When you’re looking at credit, you have to be fair and consistent. Holding one applicant to a higher standard can be a fair housing violation. Make sure you have a set of standard qualifying criteria in place, which includes credit.
Here’s how to utilize a tenant’s credit report and what you have to do to comply with federal laws.
Pulling a San Ramon Tenant Credit Report
A credit check helps you understand a tenant’s history of borrowing, spending, and bill paying. You’ll get an idea of whether they pay their bills on time and if they’re responsible with debt. You can also see whether they have the money available to live in your San Ramon rental property. Someone who is in serious debt may have trouble paying the debt and the rent.
Before you can run a credit check on any of your applicants, you need to get permission. Include something on the application that allows you to check credit, and make sure each resident over the age of 18 submits a completed and signed rental application.
Follow all Fair Credit Reporting Act guidelines and fair housing laws. In order to effectively check credit, you’ll need to gather the following information on the application:
- Full legal name
- Social security number
- Date of birth
- Legal addresses for at least the past two years
Depending on the service you use, there may be a requirement that you prove you’re a landlord running a credit check for the purposes of renting a property. Be prepared to verify your own identity. You can use one of the major credit bureaus, a third party credit checking service, or ask for help from a San Ramon property manager.
Make sure you do a nationwide eviction check as well. Sometimes, evictions will show up on a credit report, but not always.
Tenant Credit Report Red Flags
Don’t focus on the credit score. Instead, dig into the report and make sure everything is consistent with what you find on the application.
You’re likely to find some debt, and that’s okay. A red flag will be when the debt surpasses the tenant’s ability to pay. You don’t want to rent to someone on the verge of bankruptcy. Medical debt can be difficult. These bills will drag down a tenant’s credit score, but it doesn’t necessarily mean they’re financial risks.
Real red flags in the credit report might be unpaid utility and other housing bills. If a prospective tenant has had the electricity shut off in their former home, you may not want to approve them for your home. Look for any judgments or money owed to former landlords as well.
If you’re going to deny a tenant based on credit, you need to send a letter explaining that and providing instructions on how they can access their free credit report.
We can tell you more about credit reports and tenant screening. We can also help you find a well-qualified San Ramon tenant. Contact us at California Pacific Realty.