Tenant Credit Checks
Are you a landlord in Grand Rapids Michigan looking to do Tenant Credit Checks on prospective residents? Compass Property Management would like to help you with some basic tips to guide you in choosing a great tenant for your rental property.
Verify home addresses
When doing tenant credit checks a simple first step is to verify the applicant’s current and previous addresses. Make sure the information provided on the credit report matches the information provided on the application. This is also helpful when doing landlord references to help you verify the person you are calling is truly a past landlord.
Verify places of employment
Another simple yet often overlooked part of doing tenant credit checks is making sure the applicant’s current and past places of employment match the details provided on their application. Unfortunately some applicants may falsify employment or income history in order to meet your tenancy requirements. Making sure applicants can meet the financial obligations of the lease is an important step in properly vetting them.
Verify eligibility of utilities
As a proactive landlord, you will also need to think ahead beyond simply getting a signed lease. If a prospective resident will need to put utilities in their name, such as gas and electric, it’s a good idea to make sure they will actually be able to do it. A common problem is when an applicant has previous (or current) utility monies owed. You may not be able to tell for certain every time, but some applicants may have serious red flags on their credit reports that will warn you they may not be able to get the utilities in their name. Keep an eye out for unpaid utility balances and utility accounts in collections,
Bankruptcies must be discharged
As part of doing complete tenant credit checks, we recommend that all bankruptcies be discharged. You may also wish to set a specified period of time has elapsed since discharge. Compass Property Management strongly recommends the use of a written tenant screening policy. Your policy should speak to your requirements regarding bankruptcy. Once you’ve set your policy, be sure to use it consistently across all applicants.
Consider Medical Debts?
Past due medical balances and medical accounts in collections often litter tenant credit checks. You may choose to ignore these, or set your screening policy to limit amounts and/or quantity of medical debts you consider acceptable. Just remember, these debts are common and the stricter you are in your policy the harder it will be to find an applicant that meets your standards.
Consider garnishments (child support, loans in default, etc)
When looking over an applicant’s credit report, you will want to keep an eye out for garnishments for two reasons. First, garnishments show a history of non-payment. Second, garnishments reduce an applicant’s effective income – income they need to pay existing bills such as rent and utilities.
Check for judgments from private owners or management companies
An overarching theme when looking over tenant credit checks is this question – “Is this applicant going to pay rent?”. In a perfect world, every applicant will come to you with perfect credit. However that is not the case and eventually you find yourself comparing the pros and cons of multiple applicants with varying credit issues. Not all credit issues, in our opinion, have the same weight on the question “Is this applicant going to pay rent?”. Someone with a cell phone bill in collections is probably a better bet then someone with a natural gas bill in collections. Someone with past due medical bills will likely be a better lease holder then someone with past due balances owed to other landlords or apartment complexes. Finding judgements from other landlords is a major red flag.
Professional Leasing and Property Management Services
It is our experience that Tenant Credit Checks is an area where most private landlords feel the least confident in their own skills. Properly vetting applicants is the foundation of a profitable lease. Not completing full Tenant Credit Checks upfront can lead to damages in excess of security deposit, lost rent and even eviction costs. At Compass Property Management we offer multiple levels of service, each brings with it our years of experience in completing a rental background check. Are you simply looking for help filling a vacancy? Then our Placement Services are for you. Are you looking for a break from day-to-day toils of being a landlord? Then our Personalized Management Service is right up your alley.
If you decide you want to keep doing the showings and running your own applications, that’s great. The Rental Property Owners Association is a great resource for private landlords looking for training and advice.