Credit Check for Rental Properties

Sam Ciulla, Background Screening Expert
Sam Ciulla, Background Screening Expert

You can increase the likelihood of selecting the best tenants and help protect your rental investment if you know what to look for when you perform a credit check for rental properties.

Sam Ciulla - Vice President of National Application Processing & Screening Inc. - knows what information should be checked and the best way to obtain the information. NAPS Inc., a leading provider of background checks, streamlines the research process for their clients by providing web site access to the information needed to develop background reports.

Why is a credit check necessary when considering a prospective tenant?

A credit check for rental properties verifies the applicant's credit worthiness. It outlines existing debts, contains a factual record of an individual's credit payment history and shows whether the individual has been successful in paying debts on time. A credit report will include a wealth of information. Depending on what creditors and other sources have provided, it can include data such as:

  • How much is owed on an account
  • Credit limits of current accounts
  • Current and prior addresses
  • Current and prior employment
  • Date of birth
  • Social security number
  • Names of inquiring companies who have recently accessed your applicant's credit report
  • Public records including bankruptcies, judgments and foreclosures

Do you have to get approval from a prospective tenant to run a credit check?

Yes. Landlords are permitted by law to review a credit report to objectively determine whether they are willing to rent their property to a prospective tenant. However, Section 604 of the Fair Credit Reporting Act (FCRA) requires landlords to obtain permission from the individual before running the credit check. The FCRA also provides guidelines for proper disclosure and a formal declination procedure if the decision is made to not rent the property to the prospective tenant.

Should all three credit bureaus be checked, or is it enough to check only one?

There are approximately 205 million credit reports on people in the United States who have a charge account, car loan, student loan, or monthly rent payments. As these people pay their bills, most lenders report payment information to credit bureaus. The three major credit bureaus are:

  • TransUnion
  • Experian
  • Equifax

For decisions involving granting large amounts of credit, such as approving a mortgage home loan, credit grantors often want to see the credit reports from all three bureaus. Some differences are to be expected since all three bureaus collect the data separately and they do not share the data collected with each other.

For a credit check on a prospective tenant, landlords can check one or more credit bureaus; however, they need to have a uniform and impartial tenant screening approach to protect themselves from fair housing lawsuits.

Merged Credit Report

A landlord may inquire into a prospective tenant's credit using one bureau and make a preliminary decision before the other two are checked. A merged credit report shows the information from all three credit bureaus and gives the landlord the opportunity to see all the inquiries that were made at the three bureaus. A good percentage of the credit data on all three credit reports is the same.

Should a credit check be completed on everyone signing the rental agreement?

Every adult who plans to live in the rental property should complete an application. A landlord should also thoroughly check each applicant's credit background. That includes both spouses in a family and each roommate in a group. If they are signing the lease, they need to give the landlord their individual identification information and permission to check their credit report.

What are the key aspects when performing a credit check for rental properties?


The minimum screening a landlord should do is a credit check. A credit check can tell a lot about the person who wants to rent the property. The credit check will give good clues on how they manages their money including:

  • Credit card balances
  • Number of credit cards
  • Credit cards paid
  • Loans outstanding
  • Loans paid
  • Collection items
  • Credit score

Credit checks also reveal the employment history and previous addresses of a prospective tenant. This is particularly useful for deciding if they have a steady income. If they have been involved in any complicated lawsuits, tax liens or have a history of bankruptcy, a credit check will provide red flags to help a landlord identify potentially unsatisfactory tenants. These items are important elements that will create a profile of a prospective tenant. A landlord can choose the prospective tenant with the best profile to achieve a stable, reliable cash flow on the rental property.

Are there other sources that can be checked to evaluate the prospective tenant's credit history?

Sometimes a credit report is not as useful for certain types of prospective tenants such as students or people who have a habit of paying cash for everything. These individuals don't have a great deal of credit history to rely upon. However, there are more options to consider:

  • Tax statements - If prospective tenants will consent to it, a look at their tax statements will provide a break down of their revenue and expenses
  • Former landlords - Ask for references. It's always important to ask landlords if they were congenial tenants who kept the rental property orderly and neat.
  • Criminal background checks - Taking the time to run a criminal background check, both after running a credit check and before accepting them and signing a lease, can reduce a landlords exposure to theft, violence, damages and the genuine risks associated with new tenants or repeat offenders.
  • Eviction record checks - Running an eviction record search on an applicant as part of an applicant screening process is very sensible. Run the sesarch in the state where the property is located or, on a recently relocated individual, the state from where the applicant is moving.
  • Employment verifications - With a simple phone call, an employment verification will ensure the applicant is truly employed with the company listed on their rental application and that the income matches what was declared. Having an employment verification done on all top qualifiers as part of the applicant screening strategy can be very beneficial.

What are the landlord's responsibilities if they deny someone because of bad credit?

If a landlord makes the decision to deny a consumer the ability to rent based in whole or part on the individual's credit report, the landlord must comply with section 615(a) of the federal Fair Credit Reporting Act. Specifically, a landlord must:

  • Provide oral, written, or electronic notice of the denial to the consumer
  • Provide to the consumer orally, in writing, or electronically:
    • The name, address, and telephone number of the consumer reporting agency (including a toll-free telephone number established by the agency if the agency compiles and maintains files on consumers on a nationwide basis) that furnished the report to the person
    • A statement that the consumer reporting agency did not make the decision to take the adverse action and is unable to provide the consumer the specific reasons why the adverse action was taken
  • Provide to the consumer an oral, written, or electronic notice of the consumer's right to:
    • Obtain a free copy of a consumer report on the consumer from the consumer reporting agency **Dispute with a consumer reporting agency the accuracy or completeness of any information in a consumer report furnished by the agency

    LoveToKnow would like to thank Sam Ciulla for taking the time for this interview and for providing valuable information for LoveToKnow readers.

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Credit Check for Rental Properties