How to Run Credit Check on Tenant: 6 Steps to Consider

how to run a credit check on tenants

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Why running a credit check on tenants is a must-have for landlords. Learn the best practices for performing tenant credit checks to decide who to rent to.

A credit check on a tenant is a process in which a landlord or a property manager reviews a potential tenant’s credit report to assess their financial responsibility and creditworthiness. The credit report provides information on the tenant’s credit history, payment history, outstanding debts, and overall credit score. This article will explain how to run a credit check on a tenant as a landlord.

Importance of Credit Checks on Tenants

The purpose of conducting a credit check on prospective tenants is to ensure that they will pay rent on time and fulfill their financial obligations in the future when they are under a lease agreement. If a tenant has a good credit score and a positive credit history, it indicates that they are financially responsible and very likely to pay rent on time. Whereas, if a tenant has a low credit score or a history of late or nonpayment, then it is a matter of concern.

Credit checks are typically conducted as a part of a comprehensive tenant screening process, including other checks on tenants like employment, income verification, rental history, and criminal background. The credit check results, along with other screening processes, are used to make an informed decision on whether to accept or reject a tenant’s rental application.

Importance of credit checks

Key Takeaways

Credit checks are an important part of the tenant screening process for landlords and property managers for several reasons:

  • Assessing tenant’s financial responsibility and creditworthiness.
  • Reducing financial risk by filtering the tenants with poor credit history.
  • Ensuring timely rent payments by renting out to tenants with positive credit history.
  • Fulfilling legal compliance to avoid legal complications.

What Information is Needed for a Credit Check?

There are some guidelines for both landlords and tenants necessary for a credit check. As a landlord, you must follow all Fair Credit Reporting Act guidelines and be able to verify that you’re an actual landlord before you can run a credit check on rental applicants. Also, rental applicants over the age of 18 must a completed rental application and give the landlord permission to check their credit.

How to Run Credit Check on Potential Tenant in 6 Steps?

Running a credit check on tenants requires compliance with federal and state laws, including the Fair Credit Reporting Act (FCRA). Here are the steps to follow to run a credit check on tenants:

  • Obtain written permission: Before you run credit checks on tenants, you must obtain their written permission. You can get permission by having them fill out the rental application that includes a section for authorization to perform a credit check.
  • Choose a credit reporting agency: There are many credit reporting agencies that offer tenant screening services. The three main credit bureaus include Equifax, Experian, and TransUnion. 
  • Provide tenant information: In order to perform a credit check on tenants, the credit reporting agencies require the tenant’s name, social security number, and other identification information. You need to provide that information to them.
  • Pay the fee: You need to pay credit reporting agencies typically a charge for tenant screening services. These bureaus charges typically around 25$ to $75 per applicant depending on the information requested.
  • Review the credit report: Once you receive the credit reports, you need to review them carefully to determine the tenant’s creditworthiness. Make sure you look for signs of financial instability, a history of late payments, or bankruptcies.
  • Use the information to make an informed decision: Once you reviewed the credit report of the tenants, use the information to make an informed decision in order to approve the tenant’s application. Although poor credit score is one factor to consider deeply, it doesn’t necessarily mean that the tenant with a poor credit score will be a bad tenant.

How Long Does a Tenant Credit Check Take?

The time it takes to complete a tenant credit check can vary depending on a few factors like the credit reporting agency, the volume of requests they receive, and the responsiveness of the tenant in providing necessary information. After you have all the necessary information, the credit check can typically be completed within a few business days. 

Online credit reporting agencies also offer a quick turnaround time for tenant credit checks. Some agencies can provide credit reports within minutes of receiving the tenant’s information, while others may take a few hours or up to a day. If you choose a traditional credit reporting agency, then the process may take a little longer, as you may need to submit a written request and wait for a physical copy of the credit report to be mailed or faxed to you.

What to Look for in a Tenant Credit Report?

What to look for in a tenant credit report

A tenant credit report is a document that provides information about a potential tenant’s creditworthiness and financial history. The information from different bureaus and services is different, but all credit reports contain:

Credit Score: A credit score is a three-digit number that represents the tenant’s creditworthiness. A score above 650 is considered a good credit score.

Payment History: This shows the tenant’s history of paying bills on time or if there are any late payments or collections accounts.

Debt-to-income Ratio: This ratio shows the tenant’s ability to manage their debts. A ratio below 36% is generally considered a healthy level of debt.

Employment History: This shows that the tenant has a stable source of income.

Criminal Record: A criminal record contains criminal convictions or a history of evictions, which is a red flag.

Credit Inquiries: This shows if the tenant is applying for credit frequently, which can be a warning sign.

Personal Information: Personal information on the credit report is helpful to make sure that the personal information, such as name and address, matches the information provided by tenants on their rental application.

Also Read: Can Police Remove Squatters?

What If a Tenant Cannot Authorize a Credit Check?

It can be a challenge for landlords to understand the financial habits of prospective tenants if they cannot authorize a credit check. But there are still alternative ways for it. Landlords can request other information from the tenant, such as income documents, employment, and rental history. They can also explore other methods to screen the tenant properly, such as using soft inquiry services or credit reporting agencies to demonstrate their financial stability and responsibility. The landlords shouldn’t underestimate the Fair Credit Reporting Act guidelines for the credit check process.

OKC Home Realty Services performs tenant background checks and credit checks on behalf of landlords. Contact us if you are looking for a property management company in Oklahoma City for your property management needs.

FAQs on Running a Credit Check on Tenants

Should you accept a tenant provided credit report?

No. It's not a good idea to accept a tenant provided credit report. The credit report contains sensitive personal information and landlords need to ensure it is accurate and up to date. It's a good practice too request a credit report directly from a reputable credit reporting agency.

What affects a tenant’s credit score?

A tenant's credit score is affected by following key factors:
1. Payment history
2. Credit utilization
3. Length of credit history
4. Credit inquiries
5. Public records

Can I run a credit check on a tenant without their permission?

No, you cannot run a credit check on a tenant without their permission. You must obtain the tenant's written consent to run a credit check, as required by federal law.

What information do I need to provide to run a credit check on a tenant?

To run a credit check on a tenant, you typically need to provide their full name, date of birth, social security number, and current address. You may also need to provide your own personal information and business details.

scott nachatilo


Scott Nachatilo is an investor, property manager and owner of OKC Home Realty Services – one of the best property management companies in Oklahoma City. His mission is to help landlords and real estate investors to manage their property in Oklahoma.