Sending Credit History Report To Potential Landlord
Magali Swinderman
I understand that it is normal course of business for realtors and landlords to request credit scores to verify renters' history and ability to pay. Normally though, they ask for permission to run a credit report, or just straight up ask what my credit is; but, in this instance they've asked me to supply the credit report.
Not normal, but should be. This approach saves money (these costs are already baked into rent or application fees, so hopefully this saves you money) and it also prevents inquiries which are not a big deal but do have a small impact on credit score (multiples will get viewed as one within a certain time period, but this could prevent any inquiries).
I've been a fan of using a product wherein the tenant submits info and pays for a background and credit check and the results get sent to me, rather than me having to be responsible for handling tenants personal information. This approach of re-using an existing, potentially free, credit report is even better for tenants, as they can furnish them to every potential landlord (assuming more landlords switch to this approach).
If a landlord's chief concern is that they don't want to be personally handling your private data (i.e. your SSN), there are third party escrow services that will collect identifying information directly from potential customers and provide the report to the lender, without the lender needing to handle the credit pull directly.
If a landlord's chief concern is that they don't want to have to pay for your credit report, well - maybe they should just make a decision without it, if they don't find it valuable enough to pay for. Credit reports pulled by lenders from a single bureau typically cost $15 or so, it isn't a make-or-break cost when considering the financial impact of an apartment rental contract.
You have to decide for yourself if you're okay with doing this, but ultimately, it's not much different than pirating music or computer software, or any other form of license violation on an intangible product or service.
There are no privacy concerns for you as the information you're asked to submit is exactly the same as they could get from CreditKarma.com. It's not illegal for you to transmit your credit report to whoever you like, after all, it's your personal data.
There is a problem for the landlord who have to trust the report you give them, instead of getting one from an independent third party. It's up to them to mitigate any risks of accepting bad tenants who submitted a fake report to look better. Maybe they have their own criteria allowing them to weed out bad tenants, or perhaps they run a credit report on tenants they consider risky.
I wonder if this is comparable to a bank doing a soft inquiry to prequalify a customer. In this case if the customer decides to go with the the "pre-qualified offer and submits an application a credit report would be pulled directly from a cra.
Assuming everyone is on the up and up I can see the benefit to this. Unfortunately the reason why landlords pull credit is because people are not always forthcoming about their financial woes so while there are benefits there all sorts of the problems (and there are many i.e. possible discrimination, Id theft are the first that come up). Also the cras provide data (credit reports) based in specific permissible purposes so in theory a consumer using their credit report this way could be a violation of their agreement with credit karma and the like. I like the idea of certified background professionals being authorized to run the credit and then screen the results based on the land Lord's leasing criteria. It limits how many times your credit is run while looking for a new place, because the background folks are certified their certifying agency could audit to ensure compliance with privacy and properly applying the Tennant's leasing criteria anyway just my thought have a good day
The other landlords won't do this, because they are concerned that bad tenants would use reports that have been altered (it's pretty easy to edit a PDF file). Also, those landlords make money off the credit report fees; i.e. It doesn't really cost them $30.
It's pretty common in the USA that landlords want to know your credit history before they let you sign a lease. They want to know how much you make as well as how much debt you have so they can verify your ability to pay rent. Tenants tend to have pretty strong protections in the USA (some states more than others), and the cost of having a bad tenant can easily run into the tens of thousands of dollars.
The landlord usually has fixed costs that continue regardless of whether or not they're paid (mortgage, insurance, certain utilities), so if a tenant refuses or is unable to pay their rent they're not just out the cost of that rent, they also have to pay those substantial fixed costs out of pocket: essentially they lose two month's rent for every month a tenant doesn't pay. If the tenant refuses to move out then the landlord needs to go through the legal process of eviction, which can take months or up to a year, all the while the tenant isn't paying.
My only concern about your story is that the landlord wants you to submit your credit report to them. Typically the credit report is gotten directly from the credit bureaus, otherwise you could falsify the information and send him a fake. All of the major credit bureaus in the US market their services directly to landlords:
Your landlord might ask for your social security number (or whatever your country's equivalent is). However, services now exist that allow your landlord to get your credit history without handing over your personally identifying information. The landlord just needs your email, then the credit bureau verifies your identity directly and sends your landlord a verified report that does not include your personally identifying information.
According to a SmartMove survey, 84% of landlords cited payment problems as their top concern. A credit check is a prudent method of inquiry that may reveal what to reasonably expect from your renter in terms of their financial behavior.
Pulling traditional tenant credit reports usually requires landlords to follow a lengthy process, which may include a landlord identity check, a background check into your business, and a property inspection.
Landlords require trustworthy information in order to make an informed decision. Up to 94% of landlords surveyed would recommend SmartMove to others, as it provides detailed reports you can use to spot tenant warning signs.
And finally, everything with SmartMove is completely online. Simply set up a free account, provide SmartMove with the applicant's email address, and then get the reports delivered. With pay-as-you-go pricing, you only pay for the screenings SmartMove conducts rather than paying a costly subscription fee that may be unnecessary if you only have a couple of properties or just a single one.
Cosigners are legally required to pay the rent if the applicant fails to do so, but it could depend on your jurisdiction and the terms of the agreement. They will sign the lease agreement with the applicant so they have a financial and legal obligation to you, the landlord. Depending on your specific state, you might be able to seek payment from both the renter and cosigner for nonpayment of rent or may go directly to the cosigner to receive your legally-entitled payment.
Remember that this material is intended to provide you with helpful information and is not to be relied upon to make decisions, nor is this material intended to be or construed as legal advice. You are encouraged to consult your legal counsel for advice on your specific business operations and responsibilities under applicable law. Trademarks used in this material are the property of their respective owners and no affiliation or endorsement is implied.
Private credit reporting agencies collect and sell credit files and other information about consumers. Many landlords find it essential to check a prospective tenant's credit history with at least one credit reporting agency to see how responsibly the applicant manages money.
Depending on the type of report you order (the offerings vary according to the agency you deal with), you may also get an applicant's credit score. The most commonly used credit score is the FICO score. It ranges from 300 to 850, and purports to indicate the risk that an individual will default on payments. High scores indicate less risk. Generally, any score above 650 is considered a medium risk or less.
To run a credit check, you'll need a prospective tenant's name, address, and Social Security number or ITIN (Individual Taxpayer Identification Number), which will typically be on the rental application or consent to background check forms you ask prospects to complete. The application is also the place for applicants to authorize you to run a credit report. Be sure to tell prospective tenants the amount of any credit fee you are charging (discussed below).
As linked above, each of these credit bureaus offers tenant screening services that include credit checks. You can order the reports online and receive them immediately. Fees for the services vary, but usually are no more than $40.
Another popular option is to have a service request a credit and screening report from your tenant. Doing so avoids your having to collect a credit check fee (the service charges the applicant) and potentially sensitive information (such as a Social Security number). Most of the time, you simply register an account online with the service, and it will send the applicant instructions for how to order the report and allow you to receive it. The service notifies you when the report is complete and tells you how to access it. Many of the credit bureaus provide this option, as do other landlord-oriented websites such as Avail and TurboTenant.
Also, if you expect a large number of applicants, you'd be wise not to accept fees from everyone. Instead, read over the applications first and do a credit check only on those who are genuine contenders (for example, exclude and reject those whose income doesn't reach your minimum rent-to-income ratio). That way, you won't waste your time (and prospective tenants' money) collecting fees from unqualified applicants.
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