As a landlord, you probably know that a credit check is a common part of any rental application. But do you need to check your rental applicant’s credit? And what should you be looking for in their credit report?
This guide will walk you through how to read a credit report, what landlords look for on a credit report, and how to leverage the insights to select the best tenants for your rental property.
Key takeaways:
- Credit reports provide insights into an applicant’s credit score, payment history, and outstanding debts.
- Red flags include late payments, high debt or credit usage, and accounts in collections or bankruptcies.
- When reviewing a credit report, verify personal information, check payments over 12 months, understand credit scores, and calculate debt-to-income ratio.
- Double-check credit report details to make sure they match the information provided on the rental application.
- Use tenant screening tools like Baselane for comprehensive all-in-one credit and background checks, rental applications, eviction history, income and employment verification, and advanced ID checks.
What is a credit report?
A credit report is a detailed summary of an individual’s credit history compiled by credit bureaus. It has information about an applicant’s borrowing and repayment behavior, including their credit accounts, payment history, and any outstanding debts.
The three major credit bureaus that track credit history are Equifax, Experian, and TransUnion. These bureaus collect information from lenders, credit card companies, landlords and other sources about each person’s borrowing habits. These institutions report everything related to credit, from applications to accounts opened, payments made and missed, collections, and bankruptcies.
Do I need to do a credit check on prospective tenants?
A tenant’s credit report provides a snapshot of their financial responsibility. By reviewing this report, landlords can:
- Verify the accuracy of application information.
- Assess a tenant’s likelihood to pay rent on time.
- Identify potential financial red flags, such as high debt or missed payments.
Without a credit check, you can’t fully understand a tenant’s financial situation, which makes it hard to assess their ability to pay rent or cover damages. When the average eviction costs $3,500, running a credit check is a simple way to avoid risky renters.
Get a step-by-step guide on how to conduct a credit report on tenants.
What do landlords look for on credit reports?
When reviewing a tenant’s credit report, landlords generally look for:
- Late payment history: Late payments or delinquent accounts indicate potential issues with paying rent on time.
- Manageable debt: A debt-to-income ratio above 43% suggests the tenant may struggle to cover additional expenses like rent.
- Responsible credit usage: High utilization (over 30% of the credit limit) can signal financial stress.
These insights will help you decide whether the tenant is a good fit for their property.
How to get a credit report for rental applications
The most common ways of getting a tenant’s credit report are directly through one of the three major credit reporting bureaus (Equifax, Experian, and TransUnion) or through tenant screening services like Baselane.
Baselane delivers a comprehensive tenant screening report in minutes (free for landlords), including rental history, bank-verified income and employment, advanced ID checks, a full Equifax credit report, and the largest database of eviction and criminal history. Here’s how to get the report:
1. Create a free Baselane account
Start by signing up for a free Baselane account and select tenant screening. If you already have an account, log in and set up screening to start the process.
2. Add a rental property
After creating your account, input the details of your rental property. This step ensures that all screenings are associated with the correct property, simplifying record-keeping and compliance.
3. Select credit report and screening options
Choose the credit report, which includes a rental application and ID verification. Easily bundle background checks, income verification, and eviction history for a more comprehensive screening.
4. Request authorization
Invite the tenant to authorize the credit check (legally required by the Fair Credit Reporting Act) and complete their screening. They’ll get a secure link to fill out their information.
5. Review the credit report
Once the report is ready, review key sections such as their credit score, account summary, and delinquencies. Baselane organizes the data for easy interpretation, helping you make informed decisions quickly.
What is on a credit report for landlords?
What’s covered in a credit report depends on the service provider. Some only give partial credit history, while others have a complete credit profile. Baselane provides a full Equifax report, including:
- Personal information: The applicant’s name, address, phone number, date of birth, and Social Security number.
- Credit score: A score ranging from 300 to 850.
- Credit accounts: Credit cards, mortgages, and other loans, including details about each account’s status, balance, and payments.
- Credit inquiries: Companies that have requested to review the applicant’s credit, typically in the last two years.
- Delinquent accounts: Includes bankruptcies and any overdue debts that have been handed over to collections.
Baselane’s credit report also includes SSN match flags and fraud alerts. These could indicate identity theft or that a card was reported as lost or stolen, which is a major issue in the U.S. Over 326,000 cases of credit card fraud in the first three quarters of 2024, up 3% from the previous year.
How to read a credit report
Once you receive your applicant’s credit report, review each section carefully. Here’s a breakdown of how to read a credit report PDF and what to look for.
Personal information
This section includes identifying details about the applicant. Compare this information with what’s on the rental application to make sure everything matches.
What to look for:
- Verify the applicant’s name, birthdate, SSN, and contact information.
- Double-check their past addresses and ensure you have a reference for each.
Credit score
A credit score is a numerical representation of the tenant’s creditworthiness, typically ranging from 300 to 850. According to Equifax, the average credit score is 698, and lenders typically offer their best rates and products to anyone with a credit score over 720.
What to look for:
- Higher scores (700+) indicate strong financial reliability.
- Scores below 600 may require further investigation or a co-signer.
Tip: A low credit score isn’t always a dealbreaker. For example, medical debts or student loans might not reflect poor financial habits.
Credit accounts
A summary of credit accounts, including balances and financial institutions. You’ll also see the number of payments made and any overdue balances.
What to look for:
- Using less than 30% of available credit shows responsible debt management.
- Monthly debt payments shouldn’t be more than 35% of reported income.
- Frequent late payments or delinquencies signal potential risk.
Credit inquiries
A record of who has accessed the tenant’s credit report. Only hard inquiries from lenders show up on a credit report for landlords. A tenant credit check is a soft inquiry that won’t affect the credit score.
What to look for:
- Multiple recent inquiries can indicate financial distress.
- Inquiries from specific types of lenders (e.g., payday lenders) can signal high-risk
Delinquent accounts
Shows delinquencies for 30, 60, and 90 days, and total past-due balances. Plus, public bankruptcy records and any accounts sent to collections or deemed uncollectible by creditors.
What to look for:
- Collections involving landlords, utility companies, or housing-related debts.
- Bankruptcies or legal actions related to unpaid rent or evictions are serious concerns.
Tip: Everyone makes mistakes. A small credit card payment that’s 30 days overdue can probably be overlooked if other accounts are all up to date. However, a large personal loan in collections is a red flag.
Red flags to watch for in credit reports
Watch for these warning signs when reviewing a tenant’s credit report:
- Multiple late payments or accounts in collections.
- High credit utilization across accounts.
- Recent bankruptcies or significant public records.
- Excessive regular credit inquiries within a short period.
Tip: Ask tenants about issues on their credit reports. This can help you determine whether or not to rent to them. For example, you may consider an applicant with a discharged bankruptcy if their other credit check results are acceptable. Here’s a list of tenant screening questions to ask potential renters when evaluating their applications.
Sample credit check evaluation
| Criteria | Red Flag | Acceptable |
|---|---|---|
| Credit Score | Under 600 | 650 + |
| Payment History | Consistent late payments | Regular on-time payments |
| Debt-to-Income Ratio | Over 43% | Low debt relative to income |
| Credit Utilization | Over 30% | Low percentage of credit used |
| Delinquent Accounts | Housing-related collections or bankruptcy | No recent records |
Tip: If you deny an applicant based on their credit report, provide an adverse action notice, explaining the reason and giving them access to the credit report used. Make sure your criteria for accepting or denying applications follow state and local laws.
5 tips on how to read a credit report for landlords
- Double-check their personal information: Ensure the information on the credit report matches the details provided in their rental application.
- Review payments over the past year: Look at 12 months of payments (called installments on some reports) and delinquencies over 30 days. This tells you how consistently they pay off debts.
- Understand credit scores: A higher score typically indicates financial responsibility. Lower scores might signal payment issues or higher debts even if paid on time (e.g., student loans).
- Calculate the debt-to-income ratio: Compare total monthly debt payments to monthly income. A lower ratio usually means better financial health.
- Consider their entire profile: A credit report is just part of a rental application. To get the full picture, you’ll want to review their background check and rental history, check references, and verify income.
How can I use a credit report to make a decision about a rental application?
A credit report on its own doesn’t provide enough information to approve an application. Baselane provides additional reports for complete 360-degree profiles to help find good tenants, reducing risks of late payments and evictions. These additional screening reports include:
- Income and employment verification: Bank-verified income sources and net earnings to ensure the applicant is financially stable.
- Criminal background check: Searches 1.8 billion national and local criminal records across 2,500+ jurisdictions to help assess potential risks.
- Eviction history: Complete eviction history from the largest database of U.S. housing court records, which may indicate challenges with past rental agreements.
- ID verification: Advanced ID checks (supports 16,000+ ID types and 200+ countries) to avoid fraud and ensure you’re screening the right person.
- Rental history: Past addresses and references to verify past rental behavior, payment history, and whether they adhered to lease agreements.
Cross-reference these reports with tenant credit checks for a holistic view of what they’re like as a renter. A comprehensive screening report also helps highlight fraudulent information, which happens more than you think. In the last year, nearly 85% of landlords received fake income and employment documents.
Comprehensive reports you can trust, delivered in minutes.
Get free credit checks with Baselane
Reviewing tenant credit reports is an essential step in finding reliable renters, but it doesn’t have to be complicated. Baselane provides a free Equifax credit report for landlords in a user-friendly format so you can easily determine an applicant’s financial stability. Plus, you can bundle other screening reports, compare applicants, notify them of their application status, and set up leases and rent collection all in one place.
Ready to find your next great tenant? Get started for free today!
FAQs
Can renters' history be checked on a credit report?
Rental history typically does not appear directly on a credit report. However, certain aspects of a tenant’s rental behavior, such as missed payments or evictions, can impact their credit score. Here’s how it works:
- Evictions: If an eviction results in unpaid rent or legal proceedings, it may show up as part of public records on a credit report, potentially affecting the tenant’s credit score.
- Missed or late payments: While rental history itself isn’t automatically reported, missed or late rent payments sent to collections can appear as negative marks on a credit report, impacting the tenant’s credit score.
- Rent payment reporting: Some landlords or property management companies may report on-time rent payments to credit bureaus, which can positively influence a tenant’s credit score. However, not all landlords do this, so a lack of rental history on a credit report doesn’t necessarily indicate a problem.
Since rental history is not directly included in most credit reports, landlords should also verify the applicant’s rental history through references or tenant-provided documents to get a fuller picture of their behavior as a tenant.
Check out our guide on how to check tenant rental history.
What is a credit check for renting?
A credit check for renting is a review of a prospective tenant’s financial history to evaluate their reliability as a renter. Here’s what it involves:
- Check credit scores: A higher credit score (generally above 650) indicates financial responsibility.
- Look at payment history: Late payments, defaults, or collections are red flags for landlords.
- Calculate debt-to-income ratio (DTI): A high DTI ratio may suggest a limited capacity to take on additional financial obligations, such as rent.
- Review public records: Includes bankruptcies, judgments, or liens that could affect the tenant’s ability to pay rent.
A credit check is one piece of the screening process and should be combined with rental references, proof of income, and a thorough background application. Baselane’s tenant screening service delivers this information in minutes, plus eviction history and advanced ID checks to avoid fraud.
What does a credit report show a landlord?
Credit details may vary depending on the service. A tenant credit report typically includes:
- Personal information: Name, address, Social Security number, and employment details.
- Credit score: A numerical representation of the tenant’s creditworthiness.
- Payment history: On-time and overdue bills, loans, and other payments.
- Public records: Includes bankruptcies, liens, and evictions.
- Credit accounts: Current and closed accounts, balances, and payment statuses.
- Credit inquiries: Shows who has checked the tenant’s credit.
Unlike some credit reports that provide incomplete information, Baselane offers a comprehensive Equifax report with full credit details.
How do you fail a credit check for renting?
Tenants may fail a credit check for renting if their financial history raises red flags. Common reasons include:
- Low credit score: A score below 600 may suggest poor financial management or high-risk behavior.
- Unpaid debts: Accounts in collections or significant outstanding balances may indicate an inability to manage current obligations.
- Recent evictions: Evictions in the last 1–2 years are a major concern for landlords.
- Inconsistent payments: Frequent late or missed payments on credit accounts signal unreliability.
- High debt-to-income ratio: If a tenant’s debt obligations exceed 43% of their income, they may struggle to afford rent.
While failing a credit check may disqualify a tenant, landlords should consider other factors, such as employment stability and references, before making a final decision.
Does a rental lease show up on credit reports?
Rental leases usually don’t appear on credit reports. However, on-time or overdue rent payments can impact credit scores. Here are some details:
- Positive impact: On-time rent payments can improve a tenant’s credit score if reported to credit bureaus.
- Negative impact: Late payments, defaults, or lease-breaking can appear as derogatory marks if the account is sent to collections.
Landlords should still verify rental history through references and other means, even if it doesn’t appear on the credit report. This will help you spot issues early so you don’t have to figure out how to deal with bad tenants or end up evicting squatters later on.
What kind of credit report do landlords use?
Landlords typically use a tenant credit report from a credit bureau or screening service. Depending on the credit check service, the report can include a credit score, payment history, outstanding debts, credit inquiries, and public records.
In addition to the credit report, Baselane’s free tenant screening for landlords offers:
- Income and employment verification
- Criminal background check
- Eviction history
- ID verification
- Rental history
This all-in-one report delivers the most comprehensive tenant insights in minutes to help you make confident leasing decisions with just a few clicks.
Does eviction affect credit checks for tenants?
Tenants may ask you, ‘Does eviction affect credit checks?’ The answer is yes and no.
While eviction history isn’t part of a credit check, if an eviction results in unpaid rent sent to collections or legal action, it can appear in the public records section of a credit report. This can negatively impact on the tenant’s credit score.
It’s important to cross-check eviction history through additional screening tools, such as a credit and background check, and landlord references, to gain a complete understanding of an applicant’s rental background.
