One of the greatest concerns when renting one of your apartments is finding someone who will be capable of paying the rent in full and on time. Perhaps too often you’ve encountered those tenants who only pay a little bit on the first of the month, with promises (often empty) to pay the rest later in the month, or just until that next paycheck comes—you’ve probably heard all the excuses by now. It’s also equally important to find someone who has enough money in the bank to pay the rent if hard times come—and not the sort of person likely to squander what is in that bank account on frivolous things or to gamble it away. Another concern is that the potential tenant has a good steady job, one that he or she has been at for at least one year, but ideally for several years, in an area or industry that seems stable.
So how do you go about finding all this out? The last thing you want to do is to have the rental applicants provide you with their credit reports because often they are adept at falsifying them. What you need is reliable and accurate information from a trusted provider—and that’s where we come in. Our detailed Tenant Credit Report will provide information such as what accounts have been opened, credit limits, payment histories, bankruptcies, liens, and wage garnishments. One of the most important components of this report is the FICO Credit Score as it reflects the prospective applicant’s overall credit worthiness. The FICO score is a global standard and is widely used by the banking, mortgage, and credit card industries. To determine an individual’s score, FICO considers five parameters: payment history, ratio of debt to available credit, length of credit history, types of credit accounts used, and recent requests for credit. The score range is approximately 300 to 850 (the three major credit bureaus have slightly different numbering systems); a good score is anything above 720. In order to receive a FICO score, an applicant must have had at least one account that has been open for six months or longer, and at least one account that has been reported to the credit reporting agency within the last six months. Since scores can change month to month, and may differ agency to agency, it is important that you have the most up-to-date information.
Now, let’s say you discover that there have been problems in the past, such as late payments of credit cards, or the FICO score is less than ideal. None of this should automatically disqualify an applicant, but you will have to ask him or her some serious questions in order to find out about the particular circumstances. For example, maybe there were mounting medical bills, or a family crisis, or a temporary layoff from a job owing to weak economic times. These can all be legitimate reasons why someone might have been financially delinquent. The questions you need to ask are, Will these problems occur again, and if so, how will you deal with them a second time? How the applicant responds to these direct questions will go a long way in determining his or her worthiness as a tenant.
In short, problems on a Tenant Credit Report aren’t necessarily red flags—but by all means you must pay serious attention to each and every issue and carefully examine the circumstances. By so doing you will be able to weed out the truly unworthy applicants from those that, despite some past financial problems, are now on sound financial footing and will be capable of meeting all their monthly rental obligations.