The Importance of Tenant Credit Reports
You have taken the leap to become a landlord, choosing investment properties carefully and beginning to vet your potential tenants. One of the methods that you'll use to see the responsibility of the tenants is through a check of their credit. Credit checks reveal a lot of potential red flags: extremely high debts, late payments in the past, or past legal action can often be visible on the report. On the other hand, a clean credit report, full of on-time payments and manageable or non-existent debt, can give you great confidence in your new tenants.
Not every landlord chooses to use credit reports as the way they screen their clients, but they do represent a very valuable, third-party verification of the past experiences of that tenant. For instance, if the credit report turns up more or different past addresses than the client disclosed him or herself, it can help you to ask the questions you need to ask in order to discover what is going on. Just the fact of a credit report being a qualifying standard for applying to your apartment can actually increase the truthfulness of applicants: after all, many people aren't fully sure what is included in a credit report, and it can be motivating to tell the truth to the best of your ability when you really want to live in a particular property.
Because these reports are so important, a wide variety of companies have sprung up to make the process simple and easy for you as a landlord. However, some of these services are not who they claim to be. While you can definitely find a reputable agency, do not be tricked by unsolicited offers to run credit reports for free.
Recent Credit Report Scams
At last count, more than 100 organizations are trying to get between landlords and the legitimate credit reports they seek. One of the reasons they do this is that name, date of birth, social security number, and address are all required to run a credit report, and unfortunately, those pieces of information are very valuable to identity thieves.
While "free credit report" schemes often target the individuals themselves, landlords may also receive invitations to run credit reports through a particular service. This invitation may seem like it is just asking you to input the necessary information, but when you click "submit," the information will be harvested and you will not receive a credit report. If they charge a fee, they may also simply set up a recurring fee that was hidden in small print, subjecting you to ongoing charges and making it nearly impossible to cancel.
The first sign of a report service being a scam is that they are trying fairly hard to reach out to you: have healthy skepticism from the beginning if a report service is using a sponsored ad on a website or search engine, or if they are emailing you despite you never inquiring after their business. The established credit bureaus and reputable third-party vendors don't need to contact you directly with an immediate, pushy request for your tenant's private information. That, however, isn't the only sign of a potential scam, and ignoring a reputable company is worth it for a little while as you ensure you aren't the victim of an identity thief.
Signs that A Report Service is a Scam
There are a few major "tells" that make a service possibly a scam. Run through these potential scenarios every time you consider using an unfamiliar (or even one that "sounds" familiar!) credit report service. The true and real services will be able to stand up to the scrutiny, and you may save your tenant an identity theft by your due diligence.
- If you get a robocall, email, or unsolicited direct mail item that mentions a splashy, exciting new credit service, do not follow their steps to check on them. Many emails, for instance, will have you click on a box to learn more, but do not do this! This click may lead to a different website than you expect. Instead, call the phone number provided or open a new window to look up the service in a search engine. If anything seems fishy, is probably is - disconnected phone lines or unable-to-load websites from search engines may indicate a scam.
- Check the email address sender as well: often the email will appear to come from "Trusted Credit Providers" or "John Doe" or another particular person, but if you look at the address itself, it may be a very unfamiliar format, featuring strings of letters or numbers and no reputable website after the @ symbol. If someone is emailing from a non-standard email address, they are likely a part of the scam.
- Real credit reporting agencies have you verify your identity when you are applying for the credit reports; if you don't encounter any kind of verification question, exit out of the process and consider whether you need to stop any card numbers that may already have been compromised in the process.
- Whether you are tricked by the scammers (easy to do!) or catch yourself in time, report any information you have about these sites to www.consumer.gov/idtheft, the FTC's site for tracking down identity thieves. The more of these companies that are identified, the less incentive future scammers have to prey upon landlords.
- Pay special attention, if for instance, you think that the official site AnnualCreditReport.com is the one being cited; sometimes, scammers will buy a domain like AnnualCriditReport.com, relying on people reading quickly and not noticing that the site they have clicked on is not the real site. They can also hyperlink such sites to the actual text "AnnualCreditReport.com," which means they can make you think you are clicking on a different link than you are. One way to avoid this is something called "mousing over," hover your computer mouse over the link without clicking. A small amount of text will pop up somewhere in your browser indicating where that link really goes; if it is different from the text, don't click!
The Advantage of a Reputable Service
Reputable services like VerticalRent work with one or more of the three authorized credit report agencies: Transunion, Experian, and Equifax. VerticalRent, for instance, works with Experian and Transunion. A reputable service will make sure you understand charges, when there are any, upfront, and they'll be clear and concise in their description of how they offer a value-added element over running the screenings yourself. VerticalRent, for instance, has incorporated easy one-click features that make credit reporting compliant but simple for your applicants. We organize the service as part of a wider property management system, which keeps you from having to work with many different, potentially unfamiliar, vendors.
There is a value-add to using VerticalRent, but even if you don't choose our service, make sure you work directly through one of the three credit reporting agencies rather than taking a shortcut through a splashy internet company you found through a quick search engine search. Another great plan, if this is your first time requiring credit checks, is to talk to other landlords to verify how they typically conduct checks.
Remember the Rules: Running Credit Reports Legally
In addition to working through trustworthy services, make sure you follow the legal requirements to run credit reports in the first place. While it is legal for a landlord to run a credit report, there are some potential legal pitfalls to know about and avoid!
- Remember you must get written consent from your potential tenants to run their credit report. This typically occurs after the tenant has viewed the property and is applying to rent; when they submit their application, make sure there is a clear clause informing them that their credit report will be run.
- Even if you find tenant screening to be a hassle, you must commit to screening all tenants or screening none of your tenants based on credit reports. Choosing to do otherwise is discriminatory; make sure that your tenant screening qualifying standards are equitable for those of all backgrounds, demographics, and personal identities.
- It doesn't make sense to go on credit reports as the deciding factor in accepting or declining an application, because credit reports can be wrong. Use the credit report to inform your decision, but have a conversation with the potential tenant to learn if a particular debt or missed payment had a mitigating factor.
- Some tenants may not have a credit history - this happens in the very young. You may want to consider requiring a co-signer, like a parent, if a young tenant cannot meet the qualifying credit score requirement, according to The Balance Small Business.
Credit report scammers have embarrassed and frustrated many people who simply wanted to see what was going on with their credit score and credit history. Don't let yourself or your tenants be on the receiving end of that kind of humiliation! To work with a trustworthy, reputable service that will use only authentic credit reporting services, contact us today at VerticalRent.
About the author
Matt Angerer is the Founder and President of VerticalRent. He enjoys writing on a variety of topics that help Landlords, Property Managers, and Renters across America. He is particularly interested in helping renters understand their local marketplace, pick the best places to live, and find an awesome roommate. Since 2011, VerticalRent has grown to service over 100,000 landlords and renters across America.