Select Page

“What Is A Credit Check?”

Have you ever heard of the term, “credit check”, before?

You may be wondering if it’s related to money…

Yes! You’re right.

But it’s more than just that. That’s why I’m going to take the time to talk about what is a credit check.

Knowing What Is A Credit Check

As a property manager you will become very aware of what a credit check is and how to use it when weeding through the pile of applications you have for a rental property.

When most people not in the rental industry hear the term, “credit check”, will probably think of money. That’s most of what it’s about.

Credit checks are a way for a property manager to check possible renters credit and help them in determining possible tenants to rent their property.

As a property manager you should become comfortable with the process of asking and doing credit checks on tenants applying for vacant rentals.

Knowing exactly how a credit check is done, and how it can help you determine the most qualified renters for you property, is key to managing and growing your rental business.

So let’s get into the details about what is a credit check.

What Is A Credit Check?

Technically, it’s an analysis of a person’s financial position. Credit checks are regularly required by landlords and property managers to evaluate possible tenant looking at vacant rental properties.

A credit check will analyze the condition of a person’s personal bank accounts, credit card, and loan history for that individual.

The credit check also provides financial data and shows if the potential tenant has any outstanding bank statements or unpaid debts. Credit checks analyze whether a future tenant has issues regarding debt. It also allows you as a property manager get an idea if they will have problems paying their rent in the future.

Credit checks show information regarding the person’s capacity to provide or pay their obligations on time. When an individual has a positive credit check it shows if they can live up to their financial obligations like paying the rent on time. A negative credit check can almost automatically eliminate the possible tenant from renting your property.

Details About the Tenants And Their Money

Why do you need to know details about tenants and how they spend their money?

When renting to an individual it is important to have a complete understanding if they can pay rent on time.

The credit check is a history of personal financial information. It’ll also reveal in financial terms whether a person is insolvent or not.

What’s Insolvency?

Insolvency is how the individual’s total liabilities have exceeded the total assets that this person has and shows this person is no longer able to pay any of these liabilities.

A credit check depending on which company you hire to do the credit check, details a tenant’s history regarding their credit, debt, and repayment information. Credit check includes credit from past accounts within the last 5-6 years.

Credit check on the following assets that can be included are:

  • Mortgages
  • Credit cards
  • Loans
  • Mobile contracts
  • Bills

What Is NOT Included In A Credit Check

The following is not included in a credit check.

  • How much money the tenants have in their current bank accounts.
  • Their salary.
  • Savings account.
  • Criminal records.

Basis for Financial Reliability

A credit check serves as a basis for property managers to determine the financial risks and reliability of possible tenants. It serves as a basis for showing if a person has a history or the financial capacity and reliability to pay their bills and rents in the future.

As a property manager, this can help you understand if you potential tenant has a financial stability. It will be beneficial for you since you will limit your stress or worry about whether your tenant will pay your rent or not.

A quick look to a tenant’s credit check will immediately inform you if the tenant has the financial capacity to purchase a real estate property. You will know whether the person’s financial information is reliable and can provide your business revenue.

If the credit check goes a bit negative then it will be your definite basis of rejecting your future tenant.

Bad credit check allows you to easily have a reason to say no to possible renters. Through the credit check, you will understand that the tenant is financially incapable of paying their bills on time.

It may even help you assess how unstable the person’s financial situation is.

What’s Needed To Conduct A Credit Check

A part of knowing what is a credit check is knowing what you need from the applicant to perform the credit check.

Tenant’s Name and Date of Birth. The applicant must provide their full name and date of birth.

Social Security Number. The applicant must also provide their social security number to help ensure the accuracy of the credit check.

The Address. The tenant’s present address is an important element. It’s recommended to make sure this is part of the application process. The tenant’s present address will be used to check against the tenant’s electoral roll.

What’s An Electoral Roll?

This is a poll book that provides a list of all the registered voters in an area. It’s important for credit checks because it will show whether they are truly a resident of the place. It can help track a person’s lending history as well.

The Financial Associates. Credit checks include a person’s financial associates. These are connections they have with others regarding but not limited to joint mortgages, bank accounts and any anyone else with whom they have financial connections.

The Account Information. A tenant’s account information is also included. These can be any missed payments, late payments, past and existing accounts.
This information will be included in credit checks and will stay visible for at least five to six years.

Final Thoughts About What is a Credit Check

As a property manager it’s wise for you to understand what is a credit check is. There’s more to it than what you may think. With a property understanding of what is a credit check you’ll be able to properly screen rental applicants and accept the best tenant.

So start incorporating credit checks into your tenant screen process today.

Please post any questions or feedback you have in the comments below.

 

Suggested Articles:
1. Essential Tips About Tenant Screening For Property Managers
2. Key Reminders For An Effective Tenant Background Check
3. How Can You Use Rental History To Screen Tenants

What Is A Credit Check - National Rental Property Management Guides - Top Property Management Resources

Disclaimer: This commentary is a matter of opinion provided for general information purposes only and is not intended to be taken as investment or trading advice under any circumstances. Information and analysis above are derived from sources and utilizing methods believed to be reliable, but we cannot accept responsibility for any losses any person may incur as a result of this analysis. Individuals should consult with their personal financial advisers. By using this web site or any information contained in it, the user specifically and expressly agrees that no advisor-client relationship is created between said user and any author, owner, executive, or principal of this web site by either use of this web site, or by any information, product, or service offered by or on this web site. No express or implied guarantees or warranties as to investment or trading results are made, and any perceived insinuations of such are hereby expressly disclaimed.

 

ARTICLE: What Is A Credit Check?