There are tons of situations where you may need to run a credit check – typically it will be to verify your chances of payment. You may need to run a credit check on a potential tenant, borrower or some other individual. For the purpose of this article, we will focus on running credit checks for potential tenants.
Where do you submit a credit check?
In order to run a credit check on someone, you’ll need to visit one of the three major credit bureaus – Experian, TransUnion and Equifax. Each offers services that allow you to investigate the credit history of any potential tenants.
How to prepare for running a credit check on someone
There are three main steps you must follow before you can request a credit check on a potential tenant. These are:
Obtain permission from the potential tenant that you’d like to run the credit check on. They will need to fill out the appropriate documentation that provides their written consent.
You will need information like their full name, address for the past two years, social security number, date of birth, current employer, and current landlord.
Verify the above information by calling relevant contacts and asking for a piece of government-issued identification.
Collect any fees from the applicant to cover applicable costs of the credit check.
Verify with a credit bureau that you are a landlord. You’ll need to provide documentation that shows your current address, personal identification and proof of ownership on the investment property.
What should you look for in someone’s credit report?
Once you complete all of the preliminary steps and receive their credit report, here’s what you should look for:
‘Negative Items’ section which shows any outstanding and overdue accounts
Any cases of bankruptcy, eviction or foreclosure
Review each credit account or loan to see how often they pay on time and in full
Essentially, you want to look for any warning signs that you may not receive rental payments on time or in full.
Making the decision
When it comes to deciding whether you will approve the applicant or not, you should consider this. Don’t be fooled by someone if their recent and ongoing credit history suggests otherwise. However, if someone has showed they’ve been able to change their habits through on-time payments, then you may give them a second chance.
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