Credit reports are a useful tool for landlords in the process of tenant screening. You are allowed to evaluate a tenant’s ability to make regular payments on his rent, and how well he has handled similar situations before.
You can find the following information in a credit report:
Identification. This includes name, address, and employment history, though this information is not used in credit scoring. Instead, it is used to make sure that the user of the credit report (you) is looking at the right person.
Credit history. Here, the various lines of credit that the person has opened and whether or not they’re still active are listed, as well as the current balance and limit of any credit cards.
Credit report requests. It shows how many times the credit report has been asked to be seen and by whom. These will be marked as “voluntary” if the person has given consent for the request, as they would do before opening a loan or looking at the report. The mark would be “involuntary” if the consent has not been given.
Public payment history. It is the person’s history with regards to public payments required, such as legal fines and collections on overdue bills.
Certain information will never appear on credit reports, including:
Medical information (unless consent is given)
Bankruptcies that are more than ten years old
Debts that more than seven years old
There are some exceptions, however, notably failure to pay taxes or when exceptionally large amounts of money are involved (salaries over $75,000 and debt or loans over $150,000). This information is kept off the credit report in order to allow those who have turned around from bad behavior to be able to repair their credit in time.
The Fair Credit Reporting Act (FRCA) is a law under the jurisdiction of the Federal Trade Commission that describes the guidelines and statutes for credit reports. Information in credit reports can only be accessed by those who have a need to that information, which includes you. Again, though, you have to receive consent from potential tenants before checking their credit.
If inaccurate information is on the credit report, it is the responsibility of the reported individual to correct those errors, which will then be removed from that report. It is first your responsibility to show what has been reported to you to give the person a chance to explain or disprove the information.
In cases of identity theft, extra consideration must be given. Furthermore, if the information found in the credit report does prove to be the reason that a person is refused a job or a lease, that person has to be informed of that fact. Failure to comply with the FRCA leaves one open to legal repercussion and lawsuits.
Credit reporting agencies can be contacted in order to gain legal access to credit reports and the scores within. Remember, credit reports are your friends. It will help you to make the best, well-educated decisions when taking in new tenants.