Are You Allowed to Check a Prospective Tenants' Credit?

What a Credit Check Can Tell Landlords

Picture of Checking a Tenant's Credit
Is It Legal to Check a Tenant's Credit?. KLH49/E+/Getty Images

Question: Are You Allowed to Check a Prospective Tenant's Credit? 

Answer:

Yes. Landlords are legally allowed to run a credit check on a prospective tenant. In order to do so, the landlord must get the tenant's written permission.

Written Permission

The tenant must consent to the credit check before the landlord can pull the tenant's credit report. This must be done by obtaining the tenant's written permission.

  • Clause in Lease Agreement

The landlord can include a clause at the bottom of the rental application form which states that by signing this form, the prospective tenant is consenting to a credit check.

  • Separate Document

The landlord may create a separate form with this same credit check consent clause which the applicant must sign and consent to.

Information Needed to Run Credit

On the credit check consent form, the tenant will need to provide the following:

Benefits of Running a Tenant's Credit

A credit check can be an essential part of the tenant screening process. It can give you a good picture of the applicant's financial situation and their ability to pay rent on time.

  • Covers Long Period of Time

​A credit report typically covers a seven to ten year period. Therefore, it will give you a picture of the tenant's past and current credit history.

  • Provides Useful Information

 On the credit report, you can see if the tenant has ever been evicted, if they are drowning in debt, if they are late or delinquent on their bills or if they are involved in any sort of a lawsuit.

See Also: What Is a Good Credit Score?

Pitfalls to Avoid

While a credit check can be useful when selecting a tenant for your rental property, you need to be sure that you are running the check legally and you are analyzing the information provided intelligently.

 

  • Failure to Get Written Consent

​You must get a tenant's written consent before running the credit check. If you fail to do so, you may not be able to use the information that you have gathered from the report and the tenant may be able to take legal action against you.

  • Qualifying Standards

​The credit check must be part of the qualifying standards you have for all tenants. You cannot only run credit checks on one race of people and not another. You cannot require a certain credit score for one race of people and a higher credit score for another race. 

  • Don't Rely Solely on This Information

The information you gather from a credit report is useful, but you should not use it as the only means of selecting a tenant. There are professional tenants who supply false information. Other good tenants may have fallen on hard times. Ask the tenant questions about the information that comes up on the report, sometimes it could be inaccurate.

  • Too Young to Establish Credit History

​Some prospective tenants may be too young to have established a credit history. You may be able to have a parent or relative co-sign the lease if you are concerned about payment.

See Also: How to Run a Credit Check on a Prospective Tenant