How to Screen Tenants With No Credit Score or Credit History in Fayetteville When you Don’t Have a Property Management Company
As a landlord, one of your biggest concerns is how to screen the credit history of a potential tenant. Obtaining credit history from the credit report can give you some insight into whether or not the potential tenant has the ability to pay his rent. Additionally, if the potential tenant has a negative credit history, the credit report may reflect certain issues which may make you caution against renting to the potential tenant.
But what is your course of action if the potential tenant doesn’t have a credit history?
While the lack of a credit history by the tenant may cause you alarm, there are some reasons as to why a tenant might not have a credit history, or a credit history that is not in line with what a landlord is looking for.
As oddly as it sounds, a tenant may not have ever been listed on a credit account, nor obtain anything by way of credit. In Europe for example, unlike in the United States, it is not uncommon for individuals to pay for everything with cash. The value of obtaining a credit history is different than the way we perceive it here.
Additionally, the individual may have established credit with some businesses that do not report to credit bureaus. Not all lines of credit are reflected on credit reports, and it sometimes takes additional steps by the tenant to inform the company to make a report to the credit bureaus.
In the event a tenant does not have a credit history, there are certain steps you can take to ensure you have enough information to make an informed decision as to whether or not you would like to lease to the tenant.
First, we always recommend conducting a criminal background check and an eviction search. That’s a good start.
Next, request financial records such as checking account statements. These can be examined for bounced checks, average daily balances, timely housing payments, utilities and so on.
In the event the potential tenant has only been a cash only consumer, and the potential tenants bank account doesn’t reflect the aforementioned transactions, you should request copies of housing statements like utility and cable bills in addition to standard references.
Last, ensure you reach out to previous landlords. Previous landlords will be able to give you a clear understanding of their relationship with the tenant, as well as the potential tenant’s ability to pay their rent on time.
A potential tenant not having a credit history is not a show stopper, but it will require you as a landlord to do some extra work to figure out if you would like to rent your property to the tenant.
There should always be a paper trail somewhere. If not, then you may need to move on and find a better tenant for your property.
If you have any additional questions, don’t hesitate to reach out to us. We are here to help.
Get Your Landlord Resources Delivered Weekly!
Subscribe to have your landlord resources delivered weekly to your inbox, and start to learn how to effectively manage your rental investment!