Checking a potential tenant’s credit score is an automated part of the tenant screening process for most St. Louis landlords. A credit score can reveal whether a prospective tenant is trustworthy with credit, if they have a lot of debt, or if they fulfill their financial responsibilities.
It isn’t everything, however.
Credit scores are funny. You can place a tenant with a 750 tenant score who ends up breaking the lease or damaging your home. You can take a chance on a tenant with a 580 credit score, and they’ll be ideal renters, without any problems or late payments.
We recommend that you check the credit score. But, you shouldn’t stop there.
Using Credit Scores as Qualifying Benchmarks
One good reason to check a tenant’s credit score is that you may use credit as part of your qualifying process. We always recommend that landlords establish a set of written criteria before they begin collecting applications and screening tenants. This helps you keep your screening process consistent and documented. You don’t want to run into any fair housing claims or complaints, and when you can demonstrate that every applicant is held to the same set of standards, you’re doing a good job of protecting yourself.
A credit score can be one of those standards. You could establish that you won’t approve anyone with a credit score that’s under 620 or 600 or 550, or whatever you feel comfortable with.
Considering Credit Reports versus Credit Scores
The credit score can be part of your qualifying criteria, but don’t look at the score without evaluating the full credit report. There’s a lot of valuable information that you can use during your screening process.
For starters, you’ll want to use the credit report to validate the information your tenant has provided on their application. You can make sure the social security numbers and names match as well as the current and past addresses.
You’ll also want to look at what kind of debt the tenant carries and whether they’ve been responsible in paying it back. A lot of credit scores are ruined by excessive student loan and medical debt. Falling behind on an expensive medical bill is a lot different than walking out on a lease agreement. Look for past evictions and any money that’s owed to former landlords or apartment communities. You don’t want to see a lot of unpaid utility bills or other housing-related balances.
The Fair Credit Reporting Act
When you’re gathering credit information on tenants, you have to follow the federal law that protects their privacy and their access to credit information. Make sure your rental application grants you permission to check their credit. If you deny a tenant based on their credit score or credit report, you need to send a letter with specific wording that tells them this and offers them a chance to review their credit report.
We know dealing with a tenant’s credit history and credit score can be a murky area when you’re screening residents. If you’d like some help with the leasing process or anything pertaining to St. Louis property management, please contact us at Amoso Properties.
