Just in Case—The Case for Credit Reports
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By Robert L. Cain, Copyright 2008 Cain Publications, Inc. They sure look good. And what nice people! They seem to be the sort of folks you would even welcome as neighbors. You’re tempted to just forget about doing all that screening stuff—you know, calling previous landlords and running credit. But you do, anyway. You know, just in case. Just in case what? As Fidelity Mortgage observes on its website, the credit report documents a person’s financial behavior over the past seven years; for example, how many credit accounts he or she has and payment history on these credit accounts, how long he or she has had credit accounts, applications for loans, legal actions and whether he or she pays bills on time, among other things. So you run credit just in case your applicant hasn’t paid bills on time, has had judgments and collections, or has had legal actions pursued against him or her, especially by landlords. Payam Rezvan, President of ZipReports.com, points out, “Credit reports provide excellent insights to landlords, retailers extending credit, and real estate brokers to assist in profitable decision-making. Not only does the credit report provide insight into a person willingness to pay, but it also tells you if the individual income can cover their debt plus the rent.” Most nice people also have at least decent credit and will also be nice people when they move into your property. But the credit report provides some assurance that their appearing “nice” is not just a cover for an evil twin lurking within the recesses of an alter-ego, ready to wreak havoc on your property, your other tenants and your business. Power Landlording Tip Number Seven advises that if you aren’t sure about an applicant, you don’t have enough information. The credit report provides a wealth of information to ease your mind about an applicant. Another way to look at it is reflected in the words of John Maciha in his book Musings of an Irreverent Property Manager, “while the credit check process may seem rote, mundane and certainly routine, it is not! The reason it is not is because it gives us a wonderful opportunity to verify for our new lessee that he or she is buying into an apartment community that cares.” The fact that you screen every applicant thoroughly is an assurance that you are maintaining your property as a great place to live. In the landlord manual Profitable Tenant Selection, I take it even farther and suggest adding to the rental application and the rental standards sheet the following language:
That language turns what some might think a negative into a benefit for a qualified applicant. It also warns a less-than-qualified applicant that you screen everyone carefully and that he or she will likely be caught in any lie on the application. Just in case, though, you owe it to yourself, your other tenants and your investments to make sure that the applicants you are getting are truly the nice, responsible people they seem to be. |