Where Can You Get Credit Reports From?

First and most importantly, you, as a landlord, should never accept a credit report as a PDF or any other document emailed to you or provided directly by the tenant. While rare, there are instances where tenants have doctored their credit report to remove delinquent debt, change their credit score, or make other edits.

Only accept credit reports through a reputable third-party tenant screening service. Providers like:

• Zillow Rental Managers
• TransUnion SmartMove
• RentPrep
• TenantReports.com
• Property Management / Real Estate professionals

These services allow you to pull the credit reports directly, so you know what you are viewing is authentic.

Understanding the Different Parts of the Credit Report

A common misconception among landlords about the credit report is that they assume the credit score is the main, or even the only, point of the report. This is false.

A credit report is a tool for lenders to determine the ‘credit worthiness’ of applicants and their ability to repay debt. With this understanding, some individuals may have lower credit scores even with better payment history. Some reasons are:

• Individuals with too much available credit can be a risk. Would you rather have someone limited to $10,000 in credit or $100,000? Banks rank the prior applicant as more ‘secure’.
• Individuals who have one negative mark, but otherwise have great credit, will be ranked highly in their ‘bucket’ of other credit applicants with negative marks, giving them an artificially higher rank.
• Good credit repayment, but low score, due to a low amount of credit or recently opened lines of credit. Banks like a long payment history.
• Paying off debt — like your car loan — can actually negatively impact your credit since it is no longer active on your report.

Now there are multiple sections to know about a credit report, to give you the clearest picture of applicants, and these are:

• Personal Information
• Credit Score
• Total Debt (and potentially their monthly payments)
• Open and Closed lines of credit with details

First Step – Verifying Personal Information

Before reviewing the financial details of the report, the first step is to verify the personal information on the report. You need to make sure the credit report actually belongs to the person applying and is not fraud.

Look for consistency between the credit report and the rest of the applicant’s personal information, including their bank statements, driver’s license, and general application info.

Some credit reports, or applications, will not provide all of the tenant’s information like their Social Security Number or vehicle information. These are valuable details to know — whether your property is an HOA that requires vehicle registration, or the resident has unpaid rent and needs to be sent to collections — so we recommend having the selected tenant (who you select to move into the property), complete a Resident Information Form like the one below.

Second Step – Understanding the Credit Score Number

The credit score — the number synonymous with a credit report — is the numerical summary of a person’s creditworthiness and predicts the likelihood that someone will repay borrowed money on time.

The higher the score, the safer you can be that the person will repay their debt and make payments on time.

As a landlord, you are required to set a minimum credit score you will accept. Each landlord needs to determine that number — just know that the higher the score you require, the fewer applicants will be interested in the property.

The typical standard for minimum credit scores is 600 or 650, as the range for credit is:

• 750 and above – very strong credit and ideal candidates
• 700–749 – great credit and still secure, who likely has new credit or little debt
• 650–699 – acceptable credit, and the majority of people who may have 1–3 negative marks
• 600–649 – on the low end of acceptable credit and likely need clarification on the credit issues
• Below 600 – highest risk and guaranteed to have negative marks, delinquencies, and bankruptcies

Third Step – Reviewing the Total Debt and Monthly Servicing

While the credit score is important, our professional opinion is that the total debt — and the servicing on that debt each month — edges ahead of the most vital information to view.

The reason is simple: how much debt they have determines how much of their income goes to paying it, and limits how much money they have ‘free’ each month to pay rent.

Think of this and determine who you would prefer:

• An applicant who earns $7,000 a month with a 680 credit score, with no car loan and $500 in credit card debt a month?
• An applicant who earns $10,000 a month with a 740 credit score but has student loans, car loans, and two credit cards that cost $3,000 a month to cover?

In this scenario it looks like the 2nd applicant is the stronger one — but you have to remember:

• The income is gross income and not net income, so the gap in income is closer to $3,000.
• The higher debt in applicant two limits their available budget and flexibility.
• These debt and rent payments limit how much savings applicant two can put away for unexpected expenses that will come up throughout life.

Some credit screening reports will give you the monthly total they service, but other times you will need to calculate it yourself and make a rough estimate.

Fourth Step – How to Check the Credit Details for Each Line of Credit

After reviewing the ‘top line’ numbers, you can review the individual lines of credit that make up the total for the credit score and the debt total.

Lines of credit will be from anything like:

• Student Loans
• Medical Debt
• Mortgage
• Credit Cards
• Auto Loans
• Retail Credit Accounts
• Personal Loans

Each line of credit will tell you:

• The name of the creditor — such as Bank of America or Toyota
• The type of debt (collection, installment, revolving, closed)
• The status of the debt (in collections, paid as agreed, charged off, transferred)
• When the debt was last updated
• When the debt originated/started
• The original balance
• The current balance
• If the balance is past due
• A breakdown on the past due amount (30, 60, 90+ days)
• Payment history over two years

The payment history is an important part as it details if, and when, a tenant may have had trouble paying their debt. Have they recently had 30 or 60 days of late payments? That is not a good sign, compared to if it were a year ago, and now they are paying on time each month.

Professional Tip – Understanding That Not All Credit Is Equal

As discussed, the credit report is a tool to be used. It is not the end-all be-all of determining if an applicant is suitable for your rental property.

When reviewing credit reports with our clients, we prioritize payment history and payment amount over the score itself.

Furthermore, our firm believes that not all credit is equal. We are much more concerned about someone having a delinquent car payment than about their student loans.

In fact, we limit the impact of past due student loans or medical loans when evaluating a tenant’s credit score. These are incurred through a system that may be justified as unfair.

On the flip side, we are highly critical of past-due debt that is unnecessary, such as retail stores like Kohl’s, Sephora, or Target. This shows more reckless behavior, such as overspending beyond someone’s means.

Remember: the goal of reviewing credit is not to find a perfect applicant, but to identify patterns that indicate whether someone manages their financial obligations responsibly.