How Landlords Can Do Easy Credit Checks

The following post was written and/or published as a collaboration between Benzinga’s in-house sponsored content team and a financial partner of Benzinga.

Heads up for those who manage their own properties: You probably want to get the best tenants possible, right? 

Luckily, it doesn't take a lot of time or money to launch a credit check. Here's how you can do it, quickly and easily.

What Are Credit Checks?

First of all, let's get clear about credit checks, particularly if you're a first-time landlord. Credit checks take a look at credit details such as debt level, tradelines, and history of making payments to get a fuller picture of an applicant’s financial health and level of fiscal responsibility.  Ultimately, the information helps to determine whether potential tenants will likely pay rent on time each month. Three credit bureaus take in this information: Equifax, Experian and TransUnion.

What Should Landlords Look for?

When you take a look at tenants, you want to evaluate some, if not all, of the following factors that can be found on a credit report

• Actual credit data
• Payment history 
• Number of bankruptcies
• Delinquent accounts
• Loan default
• Bankruptcy
• Foreclosure
• Repossession
• Charge-offs

Related to credit history and renter ability to pay rent, a landlord should evaluate these ratios:

• Tenant income to rent ratio
• Debt-to-income ratio

You may want to use a tenant screening service to screen tenants based on these risk factors.

Why Do Credit Checks? 

The most obvious reason to do credit checks is to get important information to help you evaluate risk more effectively. You can do that by using a credit check. If an applicant has a really solid credit history and consistently pays their bills on time, then odds are they will pay rent on time.  However, if their credit report shows an inconsistent payment history, then it could be a predictor of future of behavior.

Whether a prospective tenant has a poor track-record of making payments, has outstanding debt that is in collections or a less than stellar credit history, you can use that information to base your rental decisions and make a more informed leasing decision. 

Reason 1: You see payment habits right away.

Of course, you want to see your applicant making on-time, consistent payments with lots of types of accounts over several years. Similarly, you want to see job consistency. By evaluating an applicant’s job history and employers, you can assess risk better.   

Reason 2: History usually repeats itself.

If a renter has struggled in the past with renting, chances are, it will happen again. You want to know the full behavior of a tenant to predict how it will happen with you as well. Similarly, you can check a credit report to see if that individual still owes money to a creditor. 

Reason 3: You can check debt loads.

Prospective tenants with excessive debt can present more risk.  A good rule of thumb: Look for tenants who don't spend more than 30 percent of their gross income on rent. However, that can get tricky in high-rent areas. 

Reason 4: You can check on bankruptcy status. 

A simple credit check will reveal whether a tenant has ever experienced bankruptcy, as it stays on the credit report for a specific amount of time, depending on the type of bankruptcy. Tenants could find themselves relieved of all current financial obligations, including rent, in the case of a bankruptcy. Therefore, you want to know whether a bankruptcy action is pending.

How Landlords to Do a Credit Check with SmartMove

Take a look at the credit check process with SmartMove, detailed below.
 

1. The landlord gets an email address from the renter and sends a screening request. 
2. The potential renter chooses to accept or decline the screening and creates an account if he chooses to accept the screening.
3. The applicant then initiates the release of their credit information.  SmartMove sends screening reports directly to the landlord in minutes. 
4. SmartMove helps you make a decision about whether to accept or decline the applicant and once you make a decision, the renter gets notified.

Get SmartMove

With SmartMove, landlords can tick the boxes in a lot of areas: 

• You can sign-up for free, screen online anytime and get reports in minutes
• You get credit information from TransUnion, a credit reporting agency with 40+ experience 
• You also get ResidentScore, SmartMove’s proprietary credit score that is proven to identify 15% more evictions and 19% more skips than other typical credit scores

Plus, you can explain to your applicants that they are in control. They will explicitly consent to screening and push their reports to you through SmartMove.  Their sensitive information, such as social security number, isn’t shared.  And the screening will not impact their credit score, since it is a "soft" inquiry. 

Find out why nearly 4 million landlords have used SmartMove to screen their tenants.  With SmartMove, you can get critical information in minutes to make a more informed lesion decision, even on-the-spot.  You’ll be in a better position to find your next great tenant.  And, SmartMove offers 3 convenient screening packages that serve your screening needs.  Finally, you pay only when you need to use SmartMove. There’s no monthly service charges, setup fees or other hidden costs. 

The preceding post was written and/or published as a collaboration between Benzinga’s in-house sponsored content team and a financial partner of Benzinga. Although the piece is not and should not be construed as editorial content, the sponsored content team works to ensure that any and all information contained within is true and accurate to the best of their knowledge and research. This content is for informational purposes only and not intended to be investing advice.