The Two Most Important Items on Your Tenant’s Credit Application
May 11, 2015
Tenants are the most important investment that any landlord has to make. The thing that separates the successful landlords from the ones who fail is their ability to effectively screen tenants.
Most landlords use the standard method of screening, the credit score. This is okay. But when you’re dealing with class C and D properties it is going to be harder to find a tenant with a great credit score. The longer you spend searching the more money you lose.
I’m going to provide you with two things to look for on a tenant’s credit application. They will help you avoid losing money from investing in bad tenants and vacancy.
Evictions
Evictions are tough for both tenants and landlords. The entire process is tiring and normally doesn’t end well for anybody. There are a lot of tenants who I am willing to give a chance to. But when I see an eviction on any tenant application I walk away. Why?
When I have to evict a tenant I want the process to be as short and painless as possible. When an eviction shows up on a tenant’s application it is a sign. A sign that their eviction was a more drawn out process.
It takes extra effort on the part on the landlord to make sure that an eviction ends up on a tenant’s credit report. That tenant/landlord relationship would have really had to get bad for the landlord to spend the extra time and effort to make sure that the eviction ended up on that report.
If you see an eviction on a tenant’s credit report I highly recommend continuing your search for a tenant.
Utility/Power Bill
Checking out the utility/power bill on a tenant’s credit application is another deal breaker. If I look at a tenant’s credit application and there are collections on a utility it means one of two things.
The tenant could have been evicted. I’m left with this being a possible scenario because normally evictions occur when a tenant is unable to pay on time or is unable to pay at all. It’s extremely common that when given the choice between paying a utility and paying rent, the tenant pays the utility bill.
If utilities collections show up on a tenant’s credit application, not only did they fail to pay their utilities, chances are there was an eviction also.
The second possibility is that the tenant moved out of the house without telling the landlord. No matter what reason, when a tenant leaves without giving any kind of notice to their landlord it ends up being rough for both parties. Without notification the utilities will normally stay on under the tenant’s name until the landlord realizes they are missing a tenant.
It is because of these two reasons that when I see collections for utilities pop up on a tenant’s credit application that I continue my search.
Just by checking for evictions and collections on a tenant’s credit application, you can save yourself both time and money. When you choose a tenant for a property you are making an investment. You need to give yourself the best chance for success. Use these two tips to your advantage and you’ll be on track to finding a tenant worth investing in.
