More people than ever are scheming on rental property owners and managers. Whether it's a serial delinquent payer or squatters bouncing from place to place, you need to have a system in place that protects you from such hazards. A tenant credit report is part of that system. In this post, we are looking at why tenant credit reports are necessary through the lens of the potential consequences to not requiring one.
Getting Taken Advantage Of
The reality is that tenant credit reports can reveal a lot about the behaviors of people who want to rent your properties. The detail provided paints a historical picture of how they have operated in the past. Not only do you receive their credit score, but additional information about payment habits, outstanding debt, and its type, and a sense of how often they move around.
We would never advocate judging a book by its cover. But we would never advocate letting just anyone rent your property either. If a tenant credit report looks sketchy, there's good reason to consider why and look deeper. People often move from rental to rental, taking advantage of the kind nature you find in some landlords, which is why knowing who you're getting in business with on the front end can be so helpful.
Consistently receiving late payments can be one of the most frustrating and time-consuming ordeals as a landlord. Those who are regularly late often look for owners who are more relaxed about their policies and requirements. No tenant credit report could equal attracting less-than-desirable tenants who often can't make the payments on time, or choose to delay often only because they see the landlord as weak and easily manipulated. A tenant credit report allows you to see their payment history on various charges so that you can better assess how they will be as a tenant.
No one wants eviction, and no landlord wants to evict, but the reality is that it happens. An immediate red flag in the vetting process can be that a tenant credit report shows that a prospective tenant has been previously evicted. This is not necessarily an immediate no, but it gives you a way forward for questioning. There are times when extenuating circumstances caused something out of character. In other cases, delinquency to the point of eviction is a pattern. Eviction causes landlords harm because of the dual nature of the trouble. It takes time and money away from the owners business, and it typically costs more than $1000 to process an eviction by the time the dust has settled.
We live in a culture driven by information. A tenant credit report provides landlords with the right information for making the decisions that only landlords can make. You have nothing to lose, especially when you can get a tenant credit report and charge it to the prospective tenant as a part of the initial application fees.