The PI Company

When performing a tenant background check, it’s important to validate the applicant’s income so you can correctly determine their monthly rent.

There are 4 Major Sections in a Credit Report that can give you valuable information on an applicant:

Section 1 – Personal Information – What can I find in this section & how is this helpful?

• Name – This will help you find known aliases when performing Criminal Reports
• Current & Previous Addresses – Verify and Validate the addresses reported on the application to help find unreported addresses they may have purposely left off for criminal or delinquent rent payments.
• Social Security Number – Validates and Verifies the SSN provided by the applicant. Helps eliminate fraud or identity theft.
• Current Employer and Former Employer with Dates – Validate Employment and Income history when determining rent or if they claim zero or very low income.

All of the above information can help you validate the application by cross referencing the information reported in the credit report with what was listed on the application.

Section 2 – Account History – What critical information can I find here?

• Collections
• Account Related Details
• Trades
• Buying and Payment Activities

All of the above information can help you validate and verify income for rent calculations. For example, if you have a Tenant that claims Zero Income, you can verify this number by reviewing the account history page and looking at their payment history and activities for 30/60/90 days.

For example, you can see they have made 29 $200 payments to ABC Retailer and have been Late Once 30 days and Late Zero days for 60/90. That’s a total of $5,800 so their claim of zero income is inaccurate

Section 3 – Public Records – This information gives you the following details;

• Bankruptcies
• Judgments
• Tax Liens

Information found can date back 7 – 10 years

Information is obtained from county, state and federal courts

Section 4 – Inquires – This information lists companies who have viewed the credit file over the last 2 years. How is this helpful to you?

• This can help you view if an applicant has been bouncing around to other agencies if they are running a credit report allowing you to call them as a reference.
• In addition, if they had their credit pulled at a Car Dealership or Rent a Center and they claim very low or zero income you know that may not be the truth if they are looking at buying a car or a new TV.

When developing a tenant credit score, all of this information is important. No one factor alone will determine the score. But knowing how these scores are calculated offers a landlord valuable insights into the tenant credit report and why that information is useful in evaluating the prospective tenant.

Payment History

• For the general population, this component is the heaviest weighted. A tenant’s score will take into account liens and judgments, as well as the overall amount and length of time of any delinquencies.

Amounts Owed

• Also given significant weight are the number of accounts, the proportion of balances to credit lines, and the proportion of balance to original loan amounts.

Length of Credit History

• Time since accounts opened
• Time since accounts opened, by specific type of account
• Time since account activity

New Credit

• A tenant’s credit score will also be factored on the number of recently opened account, and that proportion to existing accounts. The number of recent credit inquiries is also evaluated, along with re-establishment of positive credit history following past payment problems.

Types of Credit Used

• Number of (presence, prevalence, and recent information on) various types of accounts (credit cards, retail accounts, installment loans, mortgage, consumer finance accounts, etc.)

By considering credit score during the application process, you can get a feel for whether the number is consistent with what information and history the tenant has shared with the landlord, or whether it appears that the applicant is not being completely honest. Utilizing a credit score is just another tool to help you validate the applicants income for correct rental calculations.