Small Business

How Much Does It Cost To Run A Credit Check

By David Krug David Krug is the CEO & President of Bankovia. He's a lifelong expat who has lived in the Philippines, Mexico, Thailand, and Colombia. When he's not reading about cryptocurrencies, he's researching the latest personal finance software. 4 minute read

The landlord’s first duty is to select reliable renters who will treat the property with respect and pay rent on time. What you learn about a potential renter via a credit check might be the difference between finding a fantastic tenant and one who turns out to be a deadbeat.

You may save money on a credit check by doing it yourself. The average cost of having a provider run a tenant’s credit, background, and eviction history is $29.99, with additional tenants costing between $19.99 and $34.99 each check. Running a credit check yourself can be free of charge if you’re prepared to put in the time and effort. Once you have access to a credit report, the most difficult part is learning what to look for.

Services for Credit

All three major credit reporting agencies have services that let landlords check the credit histories of prospective renters. Depending on your needs, select a report service below to get started.

  • Experian. Experian charges landlords no price to do a tenant credit check.
  • TransUnion. TransUnion charges $30 for a credit report, credit recommendation, and criminal background check combined.
  • Equifax. Independent landlords must go via the National Association of Independent Landlords to acquire an Equifax credit report. A whole credit report costs $15.95. The cost of a full criminal background check is $29.95.

If a renter were to ask me to check their credit, I would utilize any of the three major credit agencies. Each step is simple, straightforward, and reasonably priced.

It’s also possible to employ a service that provides access to your credit report from all three major agencies simultaneously. Landlords can use the CreditReport.com service for this same purpose. Just one application and one credit report request will provide you all three tenant reports. Since each creditor reports to a different credit agency, checking all three will provide you the most comprehensive picture of the tenant’s credit history.

Finally, you may utilize a business that does all you need it to do, including checking tenants’ credit, references, and providing renter’s insurance. Portico Direct dominates the industry.

Procedures to Follow Before Conducting a Credit Check

Even while the specifics of how to run a credit check can vary depending on the website you visit, there are a few universally applicable procedures you’ll need to complete first:

  1. Obtain a Complete Rental Application and Permission to Run a Credit Check From All Adult Tenants. Provide each renter with a preprinted form to collect his or her full name, date of birth, Social Security number, prior address, and landlord contact information for the preceding two years. The form should also include a statement indicating that a tenant’s credit will be checked, as well as a signature line for the tenant’s agreement to the credit check.
  2. Collect a Fee for Credit Checks from prospective tenants. Credit check fees should be charged to potential tenants. This is the cost associated with getting a credit report from credit bureaus or credit check websites.

What to Look Out For on Your Credit Report

Now that you have access to your credit report, it’s time to look for warning signs:

  • Here is where we list all the things that may go wrong. This info may be seen on the credit report’s initial page. All delinquent, closed, and collections accounts are listed here.
  • Insolvency, Foreclosure, or Loss of Home Due to Eviction or Other Means. You may find these criticisms in the report’s “negative items” section. These indicators will also be included in the credit report’s itemized account list on following pages, right next to the account to which they are related.
  • Credit Cards and Loans for Individuals. Checking individual accounts allows you to identify any overdue payments. If the account is past due, the report will indicate that fact and detail the number of times the payment was late. The report also details the length of time the payments were overdue by, such as 30 days, 60 days, or 90 days.

How to Spot a Good Tenant From a Bad Tenant

Our actions in the past are often good indicators of how we’ll act in the future. Tenants who have a history of not paying bills or continually paying bills late are more likely to repeat this conduct in the future, which might result in missing or late rent payments.

However, individuals may develop and grow. If the renter has been making all payments on time after the negative item or items, it’s conceivable that the late payments or non-payments were an isolated incident, or that they are making efforts to rectify their behavior.

A person who has filed for bankruptcy in the past but who has subsequently developed fresh credit and always paid their bills on time, despite the mark on their credit report, is an example of a good renter despite the mark on their credit record. There is a distinct tale to be told about a renter who has experienced foreclosure or who has collection accounts from previous landlords. You might want to look elsewhere if this person is among your prospective tenants.

Bottom Line

Tenant screening should include not only credit checks but also contacting past landlords. Check the dates the renter was in residence, the rent amount, the rent payment history, and any complaints the landlord may have had about the tenant.

Learning to conduct your own credit checks may save you time, money, and worry, all while protecting you from potential harm. In this way, you can screen prospective tenants thoroughly and only accept applications from those who will treat your property with respect and pay on time.

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