Finding the right tenant is one of the most important steps in protecting your rental property and ensuring a steady rental income. A tenant credit check helps you assess a prospective tenant’s financial responsibility, payment history, and overall creditworthiness.

In this guide, we'll dive into the steps to running a tenant credit check, what to look for in a credit report, and best practices for attracting responsible tenants.

What is a Tenant Credit Check? 

A tenant’s credit report can provide valuable insights and help you make an informed decision about their creditworthiness. It’s a good indicator of their trustworthiness as a potential tenant, and it includes an overview of their credit score, plus how well they repay debt, like credit cards, student loans, and car loans. 

Looking at a tenant’s credit report can give you a good idea of how financially responsible they are. If they have a good credit score and a history of paying bills on time, they will likely pay rent on time, making for a good tenant. 

On the other hand, if they have a lower-than-average credit score and a history of missed payments, you might want to think twice about considering them as a potential renter. 

What Information Is Included in a Credit Check for Tenants?

A tenant’s credit report is a snapshot of their borrowing history. It tells you how much and how often they borrow, how many accounts they have open, etc. In a credit report, you can find: 

• Credit score
• Current and past credit cards
• Current open loans 
• Account age 
• Credit utilization (the amount of credit they have vs. use)
• Debt load (how much they owe across all their credit accounts)
• Repayment history, including missed and late payments
• Evictions, liens, and bankruptcies 
• Loans that have gone to collections

How To Conduct a Credit Check on a Tenant

Here are the steps you need to follow to run a tenant credit check:

1. Get the Tenant’s Written Consent 

Before pulling a credit report, you must get written consent from the prospective tenant. You can do so through a rental application form that includes a clause for credit check authorization. 

Alternatively, you can ask the prospective tenant to provide a credit report and submit it with their application. This way, they can get a credit history check in Canada for free. Just ensure it’s recent–ideally within the past month or two. 

2. Gather the Tenant’s Information 

If you are doing the tenant credit check, you should ask the tenant for their:

• Full legal name
• Date of birth
• Current address
• Employment details

3. Choose a Credit Reporting Agency and Request a Report

There are a few ways you can source a tenant’s credit report. If you decide to get it from one of the major credit bureaus, you can use either Equifax’s Tenant Screening service or TransUnion’s SmartMove.

You can also use a third-party tenant screening service, such as SingleKey, Liv.Rent, or FrontLobby, that pulls reports from these bureaus.

4. Review the Credit Report 

We’ll get into it more below, but here are some key factors to look for in a tenant’s credit report:

• Credit Score: A higher score (ideally 660+) suggests financial responsibility
• Payment History: Check for any late or missed payments
• Outstanding Debts: If they have high debt, they may not be able to pay rent on time
• Bankruptcies or Collections: This is a red flag 

For example, Openroom's Rental Debt Ledger records unpaid rent as a Collections Record on the consumer credit report. Always observe deeper to see if there is deeper rental history that shows red flag behaviour!

5. Assess the Tenant’s Suitability 

Now that you have the credit report, assess their suitability as a tenant based on this and other information. You should not only look at the credit report but also their employment status, income, rental history, and references. 

What to Look Out for in a Tenant Credit Report 

A tenant credit report provides key insights into a renter’s financial responsibility. Here’s what you should pay close attention to when reviewing the report: 

Credit Score

A tenant’s credit score is a quick indicator of their financial responsibility. Here’s a breakdown of the credit score ranges:

• 700+ – Excellent (low risk)
• 650-699 – Good (reliable)
• 600-649 – Fair (some risk, you might want to do additional screening)
• Below 600 – Poor (higher risk, can be a red flag)

Generally, those with good or excellent credit scores are great potential tenants. However, a lower score isn’t always a dealbreaker. Some tenants may have little credit history but are still financially responsible. 

Late or Missed Payments 

Look out for late or missed payments on credit cards, loans, and other financial accounts. It’s a red flag if you see frequent late payments, past-due accounts, or accounts in collections. 

Outstanding Debts 

If the tenant has a large amount of credit card or loan debt, they may struggle to pay rent. Some red flags to watch out for include multiple maxed-out credit cards, large loans, and a high debt-to-income ratio.  Most importantly, check if there is rental debt owing on heir credit report!

Credit Inquiries & Length of Credit History 

Several hard inquiries within a short period can be a red flag, indicating that they’ve recently applied for multiple credit cards or loans. You’ll also want to look out for a longer credit history rather than a shorter one (i.e. 5+ years). 

How to Attract Responsible Tenants 

Finding reliable, responsible tenants should be your top priority as a landlord. To attract high-quality renters, you should focus on making your rental property appealing while implementing policies encouraging financial responsibility. Here are a few effective strategies: 

Offer Flexible, Convenient Payment Options

Many tenants prefer flexible rent payment methods. By allowing payments through platforms like Chexy, you get reliable, on-time payments, while tenants can pay rent with a credit card, earn rewards, and build their credit. This also reduces the risk of bounced payments, as rent is processed securely through the platform. 

Offer Perks That Appeal to Quality Renters 

Providing small incentives can make your rental unit stand out. You might want to consider including wifi or utilities in the rent price for added convenience, being pet-friendly, or offering keyless entry for modern tenants. 

Highlight a Well-Maintained Property

Responsible tenants look for a well-kept, safe, and clean property. To attract quality renters, keep your unit in excellent condition, make necessary repairs before putting it on the market, and advertise features like in-unit laundry.  

Final Thoughts 

Running a tenant credit check is a crucial part of the rental application process, giving you insight into a tenant’s financial responsibility and ability to pay rent on time. However, credit checks should be used alongside other screening tools like rental history, income verification, and references to get a complete picture of a tenant’s reliability.

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Disclaimer:

This is an Opinion article submitted by a member of the Openroom community. The author's opinions are not necessarily representative of Openroom. Openroom has an objective to publish the voices of the rental ecosystem to ensure there is dialogue amongst all.

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