How to read a LandlordStation credit report
Tenant screening can make the difference between finding high-quality tenants and renting situations that end in eviction, property damage, and lost income. Getting a credit report from a service such as LandlordStation is the first step in determining whether a tenant is a good candidate. You need to know how to read the report for it to be an effective tool for screening.
The credit score itself doesn't tell the applicant's whole story. Some may have a great credit score, but red flags may appear you look deeper at the tenant screening. On the other hand, low credit scores could come from long-resolved credit problems. The LandlordStation report provides a summary of the major score factors affecting that number, such as delinquent accounts, tradeline mixes, and derogatory accounts. LandlordStation reports provide you with a recommended course of action based on the findings, like requesting additional financial security prior to renting to a tenant with a negative credit and eviction past.
The credit summary breaks down credit report tradelines by account categories, such as installation and revolving. This summary allows you to see what other financial obligations your potential tenant has, like car payments. This information is valuable to determine quickly whether the tenant can afford rent on top of other debt obligations. Keep in mind this does not show all other bills the tenant has, it only covers tradelines reported to credit bureaus.
Tenants with stable employment histories are less likely to leave you without a rent payment. This list shows verified employment, which is useful if you're double checking claimed employment history or need a source for a character reference.
The tradelines section of a tenant screening details the tenant's bank accounts. It displays account balances, total credit lines- whether an account is open or closed- missed payments, and other essential information. The Past Due and Current Status sections are the most important areas. High balance credit cards are another warning sign, as the tenant may be using cards to pay for a lifestyle they can't afford.
Derogatory items summarize negative events on the credit report. These items range from public records to collection accounts. If you're looking for applicants with a long history of good credit, seeing items in this summary is a bad sign. Pay attention to the following derogatory items if they show up on your applicant's tenant screening:
1. Past Due
The past due section provides a summary of all accounts that are overdue or closed with a balance. While this section indicates poor financial responsibility on the tenant's part, it's important to look into how long ago these problems occurred. A credit report spans many years, and delinquent accounts last for seven years.
All collection accounts are listed in this section. Look through the list to see whether any of the debt is old, medically-related or if the accounts have been paid in full. A collection is not always an indication of a bad tenant if they have handled it in some form or fashion.
3. Public Records
The public records section reveals any publicly-available records for the tenant. Judgments, bankruptcies and other court records are detailed in this section. If you're willing to rent to tenants with poor credit history, this section allows you to see how long ago these problems occurred.
Inquiries are created when a tenant applies for tradelines. If the tenant has a significant amount of recent inquiries, this could indicate the potential to take on an unfeasible amount of debt through credit cards and installment loans. It should be noted that LandlordStation runs what is considered a ‘soft inquiry,’ meaning that it does not affect their credit score.
5. Criminal History
Discover whether the tenant has a criminal history and learn details of the activity to help inform you decision.
6. Eviction Records
This section details any eviction records related to the tenant. If the eviction occurred a long time ago, especially when the tenant was young, they may have changed their ways. However, previous evictions should raise red flags as they represent a major risk.
Exploring the LandlordStation credit report gives you extensive visibility into your potential tenant's financial responsibility, criminal record and public records. Use this information to screen for the best tenants for your properties and avoid a major hassle down the road.
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