As a landlord, you don’t want to deal with late or missed rent payments—it’s stressful and can mess with your cash flow. To avoid that headache, it’s important to make sure your tenant is likely to pay rent on time. A credit check is one of the best tools to help you do that.
In this article, we’ll walk you through how to run a credit check on a tenant. We’ll explain what it is, why it’s worth doing, and how much it typically costs.
Key takeaways
- A tenant credit check evaluates credit score, payment history, debts, and inquiries to gauge financial reliability.
- Proper tenant screening can help avoid costly evictions, which average $3,500, by identifying responsible renters upfront.
- Stay informed about FCRA rules, non-discrimination laws, and confidentiality requirements to ensure you know how to run a credit report on tenants the right way.
- Get comprehensive credit checks with Baselane, plus criminal background checks, eviction history, and income, employment, and ID verification, all in one report.
What is a tenant credit check?
A tenant credit check is a review of a potential tenant’s credit history and financial background. It is a core part of any tenant evaluation background check. It helps landlords evaluate whether the person is likely to pay rent on time and fulfill their lease agreement.
Credit checks help landlords avoid bad tenants who might struggle to pay rent. They look at a tenant’s history of paying bills and handling money. If they’ve been good at paying on time before, there’s a good chance they’ll be reliable with rent, too.
Here are the main components of a credit check and why they’re important:
- Credit score: This is a quick summary of the tenant’s creditworthiness. Higher scores usually mean the tenant is reliable with payments.
- Payment history: Shows whether the tenant consistently pays bills on time. Late or missed payments can indicate potential issues with paying rent.
- Outstanding debts: Helps you see if the tenant is overburdened with debt. Too much debt could make it harder for them to prioritize rent.
- Credit inquiries: Indicates how often the tenant has applied for new credit. Frequent inquiries might suggest financial instability.
- Bankruptcies or collections: Red flags that show serious financial trouble in the past.
Landlords should also check for fraud indicators that could reveal suspicious activity. It’s worth getting additional details like ID verification, employment history, and address history to get the full picture of a potential renter.
Thorough tenant screening can reduce the risk of ever dealing with evicting squatters and eviction moratoriums.
Legal and ethical considerations to run credit checks on tenants
Before running a credit check on a tenant, it’s essential to understand and follow the laws and ethical guidelines that apply. Here’s what you need to know:
Obtain written consent
The Fair Credit Reporting Act (FCRA) requires landlords to get written permission from a tenant before running a credit or background check. It ensures the tenant is aware of the screening and agrees to it. Without their consent, running a credit check is illegal.
Adhere to non-discrimination laws
The Fair Housing Act prohibits discrimination against tenants based on:
- Race
- Color
- National origin
- Religion
- Sex
- Family status
- Disability
Many states and cities have additional laws that protect against discrimination based on income source, sexual orientation, or criminal history.
Ensure data accuracy
Making decisions based on inaccurate credit data can lead to unfair treatment and potential legal issues. Verify the information in the credit report and ensure it’s up-to-date before making any decisions.
Maintain confidentiality
When you request a credit report, you must certify to the credit reporting agency that it will only be used for housing purposes. Protect the tenant’s personal information and avoid using or sharing the report for any other reason.
Provide opportunities for explanation
If you find negative information in a tenant’s credit report and decide to reject their application, you’re legally required to inform them. Share the specific reason and provide a copy of the report and details of the credit reporting agency.
Properly dispose of sensitive information
Tenant credit reports are considered consumer reports under the Fair Credit Reporting Act (FCRA), which means you’re legally required to handle them carefully.
When you’re done using a credit report, you must get rid of it securely to protect the tenant’s personal info. For paper documents, this means shredding, burning, or tearing them up so they can’t be read. Make sure the file is permanently deleted and can’t be recovered for anything electronic.
What you need to check a renter’s credit
You’ll need a few key documents before starting the credit check process:
- Rental application: This should include the tenant’s full name, Social Security Number (SSN), date of birth, current and previous addresses, employer information, and contact details.
- Applicant’s authorization: A written legal consent form that allows you to run the credit check. It’s good to use an online tenant screening service where tenants can submit their information and consent directly.
- Proof of landlord identity: Some credit check services may require you to verify your identity as a landlord. This could include a copy of your ID, property deed, or lease agreement.
How to conduct a credit check on a tenant (step by step)
Wondering how landlords check credit? Here’s a step-by-step guide to get you started.
1. Pre-screen your applicant
Before you pull credit report details, it’s a good idea to do a pre-screening call with prospective tenants to make sure they meet your basic requirements.
For example, if the rent is $1,500 per month, the tenant should ideally have a gross income of at least $5,000 per month (3x the rent). They might struggle to afford the rent if their income is only $3,000 per month (2x the rent).
Not sure what to ask? Here’s a list of tenant screening questions to ask potential renters.
2. Choose a credit check service provider
An ideal credit check service provider should give you accurate and easy-to-read reports. It should also comply with all legal requirements, like ensuring the tenant’s information is handled securely and used only for rental decisions.
Look for a service that offers more than just a credit score. Ideally, it should include payment history, outstanding debts, and public records for bankruptcies and eviction history. Bonus points if the service offers criminal background checks and integrates easily with your property management process.
Tenant Screening That Actually Works
Comprehensive reports you can trust, delivered in minutes.
Baselane’s tenant screening service goes beyond basic credit and background checks, delivering deeper insights to help you make confident leasing decisions with just a few clicks.
Here’s what you can expect:
- Full Equifax credit report: Includes credit scores, credit accounts and balances, payment history, debt details, bankruptcies and collections, credit inquiries, and fraud indicators.
- Bank-verified income & employment: Provides verified income sources and net earnings, pay frequency, monthly gross income, and debt-to-income ratio.
- Complete eviction history: Eviction details from the largest database of U.S. housing court records.
- National & local criminal records: Results from over 1.8 billion criminal records in 2,500 jurisdictions, including court and incarceration, sex offender, probation, parole and/or release, and traffic records.
- Rental applications: Includes self-reported information on income, rental history check, dependents, pets, vehicles, smoking, and more.
- 3-way ID verification: Database checks, facial recognition, and document verification that supports 16,000+ ID types from more than 200 countries.
- Fast results: Get detailed background, eviction, income, and credit check reports in minutes.
- Free for landlords: Baselane offers tenant screening at no cost to landlords with lower fees for tenants than other options.
With Baselane, you can compare potential tenants side by side and manage everything in one platform, from screening to rent collection, banking, and bookkeeping. It’s a simple way to streamline your rental process and manage all of your finances in one place.
3. Create a landlord account
To get started, create a free Baselane account. Once registered, add the property details of the place you want to rent out, including the address, rent amount, and the date it’s available. Now you’re ready to run a credit check.
4. Run the credit check
Credit checks are included in Baselane’s free tenant screening report. Once you sign up, select the type of report you need and invite the tenant to complete the screening.
Here’s how it works:
- Send the screening request: Through Baselane, invite the tenant to complete their screening. They’ll get a secure link to fill out their information.
- Tenant completes the process: The tenant enters their details, including personal and financial information, authorizes a credit or background check (or both), and pays the screening fee online.
- Verification and results: Baselane verifies the tenant’s information and sends you a detailed report within minutes.
Baselane makes it simple to check a renter’s credit without affecting their credit score.
5. Review the credit check results
Here’s what landlords look for in a credit check and why it matters:
Credit score
When performing a credit check on a potential tenant, pay close attention to their credit score. If the credit report includes a Vantage Score, it typically falls into one of these five brackets:
- 300–579 (Poor): Indicates serious financial trouble or a history of missed payments. High-risk.
- 580–669 (Fair): Suggests some financial struggles but may still be manageable depending on other factors.
- 670–739 (Good): Shows financial responsibility with mostly on-time payments and manageable debt.
- 740–799 (Very Good): Strong credit history with reliable payment patterns. Low-risk.
- 800–850 (Exceptional): Excellent creditworthiness with no major concerns. Very low-risk.
A higher score means the tenant is more likely to pay rent on time, but it’s not the only factor to consider.
Payment history
Consistent, on-time payments suggest that the tenant is responsible and reliable. Look out for:
- Missed or late payments: These could indicate financial instability or a habit of neglecting bills.
- Patterns of delinquency: Repeated late payments over time might indicate ongoing financial trouble.
Income report
Check the tenant’s income using the 30% rule of thumb—their monthly rent should ideally not exceed 30% of their gross monthly income. For example:
- If the rent is $1,500, the tenant’s income should be at least $5,000/month.
- If their income doesn’t meet this threshold, they might struggle to afford rent and other living expenses.
Don’t rely on self-reported income, which can easily be faked. More than 84% of respondents (93.3%) in a recent national survey reported fraudulent income and employment documents in the last 12 months. Look for tenant screening options that verify income and employment.
Debt-to-income ratio
The debt-to-income ratio compares the tenant’s total monthly debt payments to their income. A high debt-to-income ratio means the tenant has significant financial obligations, which could make it difficult for them to prioritize rent.
For example, a tenant earns $4,000/month but has $2,000 in debt payments. The ratio becomes 50%, which may be a red flag.
Bankruptcies and collections
Bankruptcies and accounts in collections are a red flag that shows the tenant has struggled with financial management in the past. A recent bankruptcy is more problematic than one that happened years ago. Discuss these results with the tenant to understand the circumstances before making a decision.
Evictions
Although evictions aren’t on credit reports, the financial consequences (like unpaid rent) can be reported as a debt in collections or a court judgment, which negatively impacts credit scores. Evictions indicate serious issues in a tenant’s rental history, such as non-payment of rent or lease violations. It’s worth getting an eviction report and credit report to get a complete
How much does it cost to run a credit check?
The cost of running a credit check on a tenant can vary depending on the service provider. Most companies charge around $25–$75 per credit check report for tenants, with additional fees for extras like criminal background checks or eviction history.
If you plan to screen tenants through Baselane, there are zero charges for landlords—you don’t pay a dime. Tenants cover the cost of their screening report, starting at $24.99, with optional add-ons for a criminal report, eviction report, and income verification for a total cost of $49.99 (less than most screening services).
How to overcome challenges when you check a renter's credit
A strong screening process and transparency in communication are key when it comes to how to attract tenants who are a good fit. Let’s break down some common challenges and how to handle them.
Tenant hesitates to provide credit check consent
Some tenants may feel uncomfortable permitting you to run a credit check, often due to privacy concerns or misunderstandings about the process.
Let them know that a credit check is standard in the rental process and is only used to assess their ability to pay rent. Assure them their information will be handled securely and only used for rental purposes, as required by law.
Explain the difference between a hard inquiry, which can lower a credit score and is used for things like loans, and a soft inquiry, which doesn’t impact the score. Let tenants know that credit checks through Baselane are soft inquiries, so their scores won’t be affected. This often helps ease their concerns.
Limited or no credit history
Applicants like younger individuals or recent immigrants may not have much credit history to review. A lack of credit history doesn’t always mean they’re a risky tenant—it just means you’ll need to evaluate other factors.
Here’s how to approach this:
- Request additional documents: Ask for proof of income, employment history, and references from previous landlords. These can help paint a picture of their financial stability and reliability.
- Add a lease co-signer: If the applicant is otherwise a good fit but lacks a credit history, consider allowing them to add a co-signer to the lease agreement who has a stronger credit profile.
When renting to elderly tenants, consider asking for proof of savings or alternative financial documents.
Difficulty interpreting credit scores
A good credit score is somewhat subjective—what’s acceptable to one landlord might not work for another. If you’re unsure, check out our guide on how to review credit reports for rental applicants.
Bottom line
The average eviction costs landlords around $3,500 — not to mention the stress and time involved. Knowing how to run credit checks on renter applicants can save you from costly evictions. Find renters who are more likely to pay on time and take care of your property.
With Baselane, you can streamline the entire process and manage your properties on the same platform. From screening tenants and collecting rent to automating bookkeeping and generating tax packages — you can do it all in one place. Start screening tenants for free today!
FAQs
Can I perform credit checks on tenant applicants without written consent?
No, you cannot run a credit check on a tenant without their written consent. This is required by the Fair Credit Reporting Act (FCRA). You’ll need the tenant to sign a document or provide electronic authorization before proceeding.
How long does it take to get a credit report?
Most tenant screening platforms can provide a credit report quickly after the tenant submits their information and payment. However, some services don’t offer complete credit reports (limited time period and types of accounts). Baselane provides a full Equifax credit report, including credit scores, credit accounts and balances, payment history, debt details, bankruptcies and collections, credit inquiries, and fraud indicators.
Will a credit check affect the tenant's credit score?
Credit checks for tenant screening are typically soft inquiries, meaning they do not impact the tenant’s credit score. For example, Baselane’s screening process uses a soft inquiry to pull the report, so tenants don’t have to worry about their scores being affected.
Do I need to screen every adult in the household?
If multiple tenants are listed on a rental application, it’s important to run a separate credit check on each applicant.
What happens if the tenant refuses a credit check?
If a tenant refuses a credit check, you can legally deny their application. A credit check is a standard part of the rental process, and refusal to consent might indicate they have something to hide.
