How to Run a Credit Check on a Tenant: How Important is it?

Updated 02/07/25

Finding the right tenant is one of the most critical steps in property management. As a landlord, your goal is to secure a tenant who is responsible, pays rent on time, and takes care of the property. One of the most effective ways to assess a tenant’s financial responsibility is to run a credit check on a tenant before signing a lease agreement. A credit check helps landlords determine whether a prospective tenant has a history of paying their bills on time and if they have any outstanding debts that could impact their ability to pay rent.

But how do you run a credit check on a tenant? What information does it provide? And most importantly, how crucial is it in making a leasing decision? In this guide, we will walk you through everything you need to know about running credit checks on tenants and why it should be a key part of your tenant screening process.

Table of Contents

What is a Credit Check for a Tenant?

A credit check on a prospective tenant is a financial background screening that provides landlords with insight into an applicant’s creditworthiness. This report typically includes the tenant’s credit score, payment history, outstanding debts, and financial liabilities. By reviewing this information, landlords can assess whether the tenant is likely to meet their rent obligations each month.

A credit check is an essential part of the tenant screening process because it provides objective financial data that helps landlords make an informed decision about leasing their property.

Why Running Credit Checks on Tenants is Important

When considering a prospective tenant credit check, landlords need to evaluate several financial indicators to reduce the risk of rent defaults and eviction. The benefits of running credit checks on tenants include:

  • Predicting Rent Payment Reliability – A tenant with a strong credit history is more likely to pay rent on time.
  • Identifying Potential Financial Risks – High levels of debt or past bankruptcies could indicate future financial struggles.
  • Avoiding Eviction Costs – Screening tenants carefully helps landlords avoid costly eviction proceedings due to non-payment.
  • Ensuring a Stable Tenancy – A reliable tenant contributes to consistent rental income and minimizes vacancies.

How to Run a Credit Check on a Prospective Tenant

To run a credit check on a tenant, follow these steps:

  1. Obtain Written Consent from the Tenant
    Federal law requires landlords to get permission before running a credit check. Include a clause in the rental application stating that the applicant agrees to the credit check.
  2. Gather Necessary Tenant Information
    You will need the tenant’s full name, Social Security Number (SSN), date of birth, and current address.
  3. Choose a Tenant Screening Service
    There are several online services that provide prospective tenant credit checks, including:
  • TransUnion SmartMove
  • Experian RentBureau
  • Equifax
  • MyRental by CoreLogic
  1. Submit Tenant Information for a Credit Report
    The credit bureau will generate a report detailing the tenant’s credit score, payment history, and outstanding debts.
  2. Review the Credit Report Carefully
    Analyze the credit report for any red flags that could indicate potential financial problems.

What Information a Tenant Credit Report Provides

A credit check on a prospective tenant typically includes the following details:

  • Credit Score – A numerical representation of the tenant’s financial responsibility.
  • Payment History – Records of whether the tenant pays bills on time.
  • Debt-to-Income Ratio – Indicates how much of their income is allocated to paying off debts.
  • Bankruptcies or Foreclosures – Past financial hardships that may indicate a pattern of missed payments.
  • Eviction Records – Some screening services include eviction history reports.

What is a Good Credit Score for Renters?

A tenant’s credit score is one of the key factors in determining their financial reliability. While there is no universal rule, here’s a general guideline:

  • 700+ (Excellent): Highly reliable, low risk.
  • 650-699 (Good): Generally responsible, slight risk.
  • 600-649 (Fair): Possible financial issues, needs further evaluation.
  • Below 600 (Poor): High risk, may struggle with rent payments.

While a credit score is an essential factor, landlords should also consider income, rental history, and employment status before making a final decision.

Common Red Flags in a Credit Report

When running credit checks on tenants, landlords should watch out for warning signs such as:

  • Frequent Late Payments – Indicates a habit of financial mismanagement.
  • High Debt-to-Income Ratio – Suggests the tenant may struggle to cover rent payments.
  • Bankruptcies or Foreclosures – Shows past financial difficulties that may reoccur.
  • Collections or Charge-Offs – Indicates unpaid debts that went into collections.

Before running credit checks on tenants, landlords should be aware of the following legal requirements:

  • Fair Credit Reporting Act (FCRA) – Requires landlords to obtain written consent before pulling a tenant’s credit report.
  • Fair Housing Act – Prohibits discrimination based on race, color, national origin, religion, sex, familial status, or disability.
  • Adverse Action Notice – If a landlord denies an applicant based on their credit report, they must provide a written notice explaining the decision.

Alternatives to a Traditional Credit Check

If a tenant does not have a strong credit history, landlords can consider alternative screening methods such as:

  • Verifying Employment and Income – Request recent pay stubs or a letter from their employer.
  • Checking Rental History – Contact previous landlords to assess the tenant’s reliability.
  • Requesting a Co-Signer – A co-signer with a strong credit history can provide added security.

Frequently Asked Questions

Can a landlord deny a tenant based on credit score?
Yes, but the landlord must provide an adverse action notice explaining the reason for the denial.

Does running a credit check on a tenant affect their credit score?
No, tenant screening is considered a soft inquiry and does not impact their score.

Can a tenant refuse a credit check?
Yes, but a landlord has the right to reject the application based on the lack of financial verification.

How much does a tenant credit check cost?
Costs typically range from $25 to $50, depending on the screening service used.

By following these steps, landlords can make informed decisions and find reliable tenants who will uphold their rental agreements responsibly.