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“What Are The Three Credit Reports?”

Are you often struggling to decide what tenant you want to rent your property?

Deciding what rental applications are the most qualified is the key to getting good renters…  vs mistakenly accepting bad renter who can cause damages and lost revenues to your property management business.

That’s why it’s important to have a thorough background check process.  And that means you may decide to use on or all of the three credit reports.

To help you conduct effective background checks, today I’m going to talk to you about the three credit reports and how you can use them.

Knowing The Three Credit Reports

Have you ever heard of the three major credit bureaus?

The three credit reports are a combination of credit reports run by the 3 major credit bureaus utilizing different methods and evaluations of the tenant’s credit history. By checking three credit reports of your applying tenant, you can gain more information about them and you can be able to make a more reliable assessment whether or not to accept an applicant.

If you get to know the difference between the three credit reports, you’ll be able to know how information is tracked from one bureau to another. You will also get the benefit of knowing more about each bureau’s credit report and how it can help you with your credit checks on applying tenants.

Who Makes Up The Three Credit Reports

The three credit reports are made by Experian, Equifax, and TransUnion. The three credit bureaus have contracts with most if not all of the financial institutions in the USA and each monitor and evaluate credit differently. Each credit bureau does credit checks and assigns a score called a F.I.C.O. score that determines the reliability that the tenant will pay their bills and debts on time. Since each bureau is independent from each other, each bureau presents information differently which is very useful for property managers who are doing credit checks.

The three major credit bureau will provide you three credit reports. In evaluating, reviewing and combining the credit information and history on a possible tenant the three credit reports are  your best sources when doing credit checks on your tenants.  

What Are The Three Credit ReportsThree Credit Reports: Experian

Experian created one of the three credit reports. This major credit bureau will offer you credit reports with the latest credit information.

An account information from Experian is automatically updated monthly. This information can be among the following:

   Types of credit accounts

   Current balances

   Payment history

   Any derogatory items that the tenant may have

There will also be a summary of the tenant’s account totals. This may include total debt and personal information.

However, some accounts may be updated in different days depending on the new information that comes like from public records. This type of information may require a month or more to appear.

Do you want to know if your tenant has any identity fraud?

Experian’s free credit monitoring helps track key changes in a person’s credit. So whenever a change happens, Experian alerts the person about these changes.

An Experian credit report helps detect updates about the following:

   New inquiries

   New accounts

   Public records

   Fraud alerts

   Personal information updates

What Are The Three Credit ReportsThree Credit Reports: Equifax

Another entity that provides one of the three credit reports is Equifax.  Your tenant can get a free Equifax credit report if they meet one of the requirements of the Fair Credit Reporting Act. I have listed the requirements of the FCRA below.

   Persons who are unemployed and intend to apply for employment within 60 days;

   Persons receiving public welfare assistance;

   Persons who believe their consumer file contains inaccurate information due to fraud;

   Persons who have been the subject of an adverse action, such as denial of credit or insurance, within the past 60 days.

When you submit your tenant’s authorization letter if you plan to get a copy of this credit report.

Make sure that you will include all identifying details of the tenant when you request for a credit report. Details like the following must be included.

   Name

   Social Security number

   Current and previous addresses

   Date of birth

You should also remember that there is a need to verify your tenant’s identity. You can do this through an acceptable form of identification. Samples of these are valid driver’s license, pay stub, W2 form, and 1099 form. This helps in identifying your tenant’s real identity and addresses.

Who is allowed to access an Equifax credit report? If you are curious to know, then I made the effort of listing those who are qualified to access an Equifax credit report.

   Credit grantors. This is for times when an applicant applies for credit.

   Collection agencies. This is for instances when they need to collect a debt.

   Insurance companies. This is in order for them to underwrite insurance.

   Employers. This is for background checks but only with the permission of the person.

   Rental companies, phone and utility companies. This is also for a background check but only with the permission of the tenant.

What Are The Three Credit ReportsThree Credit Reports: TransUnion

TransUnion is the third company that helps provide the three credit reports.

I have listed companies who can access the credit report of TransUnion under appropriate circumstances (due to restrictions by the Fair Credit Reporting Act):

   Mortgage lenders

   Landlords

   Utility companies

   Car insurance companies

   Employers

   Government agencies

   Collection agencies

   Judgment creditors

However, there is an exception. If the court orders credit checks and credit pulls that are done for marketing purposes, they can also be accepted. Other than that, you will need the authorization of the person or the tenant to be able to get a credit report from TransUnion.

Luckily, property managers also fall under the category of landlords. So, you won’t have trouble getting a copy of your potential tenant’s credit report from TransUnion. You just need to have an authorization letter or form from the potential tenant before you can proceed in checking the person’s credit report.

What Else Should You Know About The Three Credit Reports

Information about a tenant’s credit report will be updated monthly. Lenders are the main source of how information gets in a tenant’s credit report. However, you should know that these lenders do not necessarily report to all three credit bureaus.

This is the reason why credit reports from the three companies may sometimes vary. The possibility of lenders reporting at different times contributes to the differences in the credit reports and credit scores.

You should also know that information on the credit reports will stay for up to 10 years. If there is negative information, it’s likely to stay for around 7 years. It may go up to 10 years if your potential tenant has gone through bankruptcy.

A positive information will stay on a person’s credit report for an average of 10 years.

This is applicable for information about mortgages and car loans that have fixed terms regarding the number of years for repayment. Revolving accounts such as credit cards will remain in the three credit reports for as long as the account is active.

Final Thoughts On Knowing The Three Credit Reports

Being able to gain access to the three credit reports from the three major credit bureaus is easy. The information on the three credit reports can be an important part of your tenant screening process.  It’s important that you, as a property manager, should know how you can use the three credit reports effectively in your tenant screening process.

If you have any questions or comments please feel free to enter them below.  

 

Suggested Articles:
1. How To Do A Background Check On Potential Tenants
2. What Is Rent Credit Vs Rent To Own?
3. 7 Tips On Keeping Tenants In Your Rental Homes

What Are The Three Credit Reports? - Top Property Management Resources

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ARTICLE: What Are The Three Credit Reports?