Do you Run a Credit check; Why Or Why not?

[Cameron Riley]

- Credit Checks are a major deciding factor?

- Have you ever had success without running a credit check?

- Great applicant, with poor credit, that’s the only issue, would you take a chance on him?

[John Underwood]

Absolutley I always run a full background check including credit.

I might be flexible but I would charge a larger deposit of I were flexible on requirements.

[CJ Ashton]

In my nearly 10 years of landlording, I think I've had a grand total of one tenant that had a credit score above 700.  Consequently, my expectations on the "score" are pretty low.  But it's not necessarily the score that's important, it's the other details on the credit report - what other kind of debt they have, how consistently they pay, etc.

So, my $0.02 is to always run the credit report.

[Patrick M.]

I use Cozy for background and credit. I like this because it puts the tenant in the drivers seat. They pay and they get a copy. They recognize that there is a very real credit and background check.

I think this can only help to have a beneficial “conditioning” effect on a tenant. They recognize that good landlords will really check to see if they have had an eviction or other claim, and that they are in fact recorded.

Credit I haven’t had issues with- my last few had better credit then me.

I think too many landlords charge a fee and pocket the money, trusting “their gut” or a fast payday and ****** tenants know it.

[Thomas S.]

I rent B class properties. For me a minimum credit score of 650 is everything, absolutely mandatory. If they are below 650 I don't care why, they are too much risk. They are likely living pay check to pay check or living beyond their means to have not been able to bring it back up. When my applicants are above 650 I then dig deeper into the report to determine if there are other factors that will make them too high risk. If they have maxed out their credit limits they are a no go. 

My policy is not only do they have to be able to pay I must also be able to collect when they don't. I want tenants that respect the value of having a high credit score. Most of my tenants are in the high 7s. 

Landlords renting C class properties use much different metrics. Every applicant is high risk regardless of credit score. It would still be wise to set a minimum score requirement, much lower than 650, but the reality is that C class tenants don't place much importance on protecting their credit. They often use credit without concerns of having to repay.

[Karl Hadley]

Originally posted by @Cameron Riley:

- Credit Checks are a major deciding factor?

- Have you ever had success without running a credit check?

- Great applicant, with poor credit, that’s the only issue, would you take a chance on him?

 Yes, I use credit checks as a factor in deciding who to rent to

Yes, I've had success without them

Not sure how you define poor credit, generally speaking (and not my exact guidelines) above 700 is fine, 650-700 depends on the factors, i.e. is it student loan/overall debt load or is it because of late payments in the recent past, below 650-600 will require additional rent payments upfront.  

I look at it this way, running a credit check (I use Cozy as well) is a useful data point that either corroborates the information on the application or gives me conflicting information which needs to be reviewed further...  I've had some low credit score tenants which have worked out great, they were upfront about it, and are trying to rebuild.  I've had others that thought they were the greatest applicant every and shown up with the lowest scores I've ever seen...

[Michael Noto]

1. Yes, credit checks are a major deciding factor. They not only let you know the tenants history of paying bills and debts but they can give you a picture of where they are at financially in terms of money they owe to different creditors which may or may not impact their ability to pay you your rent.

2. I have never had success with a tenant that was not screened completely and by that I mean a complete credit, criminal, eviction check.

3. To me a great applicant cannot have poor credit. Now, if the home is in a bad area and this applicant is the best quality tenant you can reasonably expect than that may be a different story.

[Scott P.]

For several years I ran credit checks.  Then, for several years I did not.  I even ran them back in the day when you could ask for social security numbers and walk right into a local credit bureau and walk out with the hard copy report in hand

I didn't really see an advantage either way.  For example, a bankruptcy lowered the credit rating but also meant the prospective tenant had their debts relieved and could not file again for a while.  A person whose score was still high may have moved into my property at the beginning of a separation in marriage and a score that was about to plummet.

Furthermore, I've rented what I think may be termed a "C" class property to tenants who surely had super low scores but I had no problem with the tenants paying.

Although I don't have any hard evidence that credit reports and background checks are helpful, I would still recommend that you pay the cost and run them if you're in any doubt.  They will serve at a minimum as one more date point for you to make your decisions by.

[Mary Ann Casey]

@Scott P. Always run a credit check. it will give you a good idea if that prospective tenant will pay the rent and pay on time.

[Ed Barone]

@Cameron Riley

Here is an article from TransUnion that may be helpful..

https://www.mysmartmove.com/SmartMove/blog/how-screen-tenant-infographic.page

[Syed H.]

Yes I check. 

No the credit score itself is useless. 

I just care if they have certain judgements, evictions on record and make 3x the rent. 

I’ve been a landlord on class A through C buildings. People of every category with a 500 to 800 credit score can **** you over. If anything it’s worse when you get screwed on the class A/B properties bc the rent is higher and repair cost is as well.

Income & eviction record are the 2 most important things. Also I always try to get 2 months security.

[Taylor Roeling]

Credit reports are very important when it comes to deciding if you will accept a tenant. While someone with a bad credit score might have had some financial trouble in the past, but is probably a genuinely trustworthy person, you have to remember it is your business - not necessarily a personal relationship. Looking for a credit score of 620+ is the general rule of thumb for landlords (650 is ideal, but most renters don't have this because they haven't paid off a mortgage). Sure, there are probably lots of success stories with landlords not running credit checks. Ultimately, it is better to be safe than sorry and ensuring someone has good credit means they will be able to pay their rent on time and are responsible with their money! Obviously, it is up to you and what you decide, but make sure to set the rules now of what your requirements are so you avoid future problems and stick to your guns so to speak.

[Johann Jells]

The credit report is part of the narrative you build to figure out who this person is.  I've rented to people with bad credit who I believed would be good tenants and were, a couple who had a medical expense bankruptcy for one. I rented to a woman with a good FICO but $200k in student loans for a humanities doctorate. She was a moderate disaster, paid her rent but a huge PITA who broke the lease and I was happy to see her go. The "narrative" said she was a person of poor judgement, but I didn't listen.

[Austin Mountain]

I look at income, credit history, landlord references and do a background check.  Credit check is really important because it will show you if they have a track record of paying their bills on time or if they don't.  It does not matter if they make $5k a month if they don't pay their rent or utilities.  Just because they make money does not mean they are responsible with it.

[Anthony Wick]

@Cameron Riley  There is no such thing as a "great applicant with poor credit". And I never "take a chance" on somebody. I rent to whom I believe will be a good tenant, based upon my set criteria. Now, could a 500 credit person pay rent on time for the entire lease? Could an 800 credit person not pay rent on time? Yes and yes. But these examples people are giving are "one offs". 

You run a credit check and you have established guidelines because experience and history will tell you a person with a 700 credit score, 3x the income to rent, and no evictions will almost always be a much better person to rent to. I don't care if it's a Class A, B, C, or D, you have to have a set criteria, whatever you think it should be. You attempt to mitigate your losses and increase your chances of a good decision. You simply cannot do that if you are not running a credit check. 1-2 months of vacancy is always better than an eviction. No process is 100% foolproof, but if you are not running credit checks and get a bad tenant then you only have yourself to blame. 

[Jay Hinrichs]

Originally posted by @Thomas S.:

I rent B class properties. For me a minimum credit score of 650 is everything, absolutely mandatory. If they are below 650 I don't care why, they are too much risk. They are likely living pay check to pay check or living beyond their means to have not been able to bring it back up. When my applicants are above 650 I then dig deeper into the report to determine if there are other factors that will make them too high risk. If they have maxed out their credit limits they are a no go. 

My policy is not only do they have to be able to pay I must also be able to collect when they don't. I want tenants that respect the value of having a high credit score. Most of my tenants are in the high 7s. 

Landlords renting C class properties use much different metrics. Every applicant is high risk regardless of credit score. It would still be wise to set a minimum score requirement, much lower than 650, but the reality is that C class tenants don't place much importance on protecting their credit. They often use credit without concerns of having to repay.

very regional  like Mississippi average credit score is 600...  a 650 would be buying a home not renting LOL

[Jay Poires]

Pull the credit but use is as another data point. Most important to me is do they pay rent every month on time? Have they ever been evicted? Call their landlord for reference and then get a reference on the landlord! Honestly I don’t care if someone refuses to pay their credit card bills...those people have to have somewhere to live too and a credit score can go up and down by a hundred points in a few months.

I think more beneficial are 3 months of bank statements. That’ll give you a far more intimate picture of what is going on with them and how financially healthy they are. I know plenty of people in Los Angeles right now paying nearly 50% of income on rent but it’s never late because otherwise they’d be homeless.

I’m not trying to manage someone’s entire financial life by deciding how much they should be paying towards other expenses beyond rent and their ability and willingness to pay it on time.

[Michael Roth]

Yes always run a credit and gull background check including criminal history.  Credit score is a great indicator of future rent payments.  The lower the credit score the more probability that you will have rent collection issues.  If the rental references are strong and income is solid and at least 3 times the rent then I would get larger security deposit to offset the risk of the lower credit score.  

[Joe Splitrock]

100% always it is a must. A credit report tells you so much more than just a credit score. Honestly just telling people you run credit will "self screen" many of the bad ones and they will never apply.

- Previous addresses, it is a way to verify they references they gave you are legitimate. You may also find extra addresses that they never claimed. I have contacted apartment complexes to find out the tenant left them off due to concerning reasons.

- Validates identity, you can match name to the photo ID they provided. Not perfect, but scammers use fake names and prey off people who don't do credit checks.

- Shows judgments and the severity of debt. If collectors are chasing your tenant, the likelihood of late rent increases. Bad credit score without debt isn't as bad as active collections.

- Shows when the debt was incurred. You can see if the bad debt is recent or a few years ago. Recent is worse because it shows their reckless behavior is ongoing.

Can you find good tenants without running a credit report? Of course you can. I can grab ten random people off the street and 9 will probably be good tenants. Some landlords never screen and just get lucky for a period of time. But, I assure you that if you scale or stay in the business long enough, you will get some bad ones.

[James Barnhart]

@Joe Splitrock

I Always get a credit and criminal report. The tenants pay for it when they get screened ,by mysmartmove.com. People with

bad credit or criminal reports don't even apply. Some people don't know that they don't have the income needed, but the report shows them and me.

[Susan Maneck]

Originally posted by @Jay Hinrichs:

Yep. Until recently I only had one tenant with a credit score of more than 600 and she had a Section 8 voucher and I don't have a single tenant that pays by check rather than by cash. Nevertheless I do get their credit report. I usually have them pull it off of Credit Karma themselves because I don't charge application fees. If their credit score is low (and it invariably is) I want to know why. If it is because of unpaid medical bills I won't hold it against them. If they have been evicted or not paid child support, I won't consider them. 

[Jay Hinrichs]

Originally posted by @Susan Maneck:

Originally posted by @Jay Hinrichs:

Yep. Until recently I only had one tenant with a credit score of more than 600 and she had a Section 8 voucher and I don't have a single tenant that pays by check rather than by cash. Nevertheless I do get their credit report. I usually have them pull it off of Credit Karma themselves because I don't charge application fees. If their credit score is low (and it invariably is) I want to know why. If it is because of unpaid medical bills I won't hold it against them. If they have been evicted or not paid child support, I won't consider them. 

 YUP thats sop in Jackson MS rental business and the rental clientele there..  folks i know want to make sure they are paying their cell bill and cable TV..  it just is what it is  

[Susan Maneck]

If someone showed up with a credit score of over 650 I would sell them a house. 

[Cameron Riley]

@Susan Maneck

True! Lol! I never run credit! I work in the urban areas and low income areas of the investment business

[Ladd Brunner]

@Cameron Riley

There are many philosophies regarding tenant screening. Depends on the size of your operation and resources available. There’s certainly value and purpose in running a credit report, but I do not.

If I were to boil it down to four of my best screening techniques, they would be:

1- Look in their car. That’s how they’ll keep your unit.

2- Talk to previous landlord, not current one.

3- Drive by their current place.

4- Call employer

There are exceptions of course and it sometimes just comes down to good old intuition. Has worked well for me.

[Sam Trentwood]

We always run credit check. Pay more attention to the credit report than the actual score. Credit report can give you a lot of information about their financial health.