Screening Out Prospective Tenants Based on Credit Checks?
Increasingly, landlords throughout North America are screening
prospective tenants in order to reduce the risks involved when
renting to unknown individuals. Risks which can easily become
quite costly to an unsuspecting landlord.
It's easy to prove the increasing popularity of tenant
screening. See for yourself! Simply "Google" the following two
words, tenant screening. Within seconds you will be flooded with
a variety of small and large companies offering the service, and
links to information on tenant screening. Go ahead! The last
time I tried the results numbered 4,110,000.
The high number of results demonstrate that there is a rising
awareness, amongst landlords, about the value of taking the
necessary steps to protecting your property. The demand is
growing and so is the supply.
However, although tenant screening is an important and effective
tool for any landlord, there is an overwhelming trend, on the
part of landlords and the service providers, to use the results
of a credit check as the main reason for screening out
prospective tenants. In my opinion, this is a mistake.
Of course, credit checks do provide valuable data on
individuals. These reports inform us of the prospective tenant's
credit history, both good and bad. But what else does an
automated list of vague descriptions, and codes tell us about a
potential tenant?
I dare say the answer is, not much.
Keeping aside the fact that credit reports are one-sided, and
often contain errors. Credit checks can not provide any true
insight on a potential tenant. For example, the credit check may
lead you to think the tenant is a bad prospect, but it doesn't
take into account the possibility that she went through a
difficult period a few years back, but has long been "back on
track".
A landlord can easily pass up a "perfect tenant", in his
thirties, simply because he had trouble making payments while
going through school, in his twenties. Base your decision on a
credit report, and you lose a potentially ideal tenants.
What about a favorable credit report?
In my opinion, it would be a mistake for any landlord or
property manager to place too much worth on a perfect credit
score.
As a bad credit report can be misleading, so can a good credit
report. For example, the report will not tell us that this
particular individual has a reputation of constantly arguing
with neighbors, and causing an all-around uncomfortable
atmosphere for the landlord's other tenants.
As well, a credit report will not describe how the prospective
tenant, with the perfect credit check, sitting in front of you,
stuck the former landlord with an $800.00 hydro bill... Unpaid
utilities often do not appear on a credit report.
Base your decision on a credit report, and you take the chance
of entering into a rental agreement with a disaster.
As a landlord, it is in your best interest to exercise due
diligence when considering a prospective tenant, and that means
tenant screening. However, in order to truly ensure a potential
tenant is the right one for you, contacting current and past
landlords, employers and references is the best method.
First hand information is, and will always be better, and more
revealing than any automated report.