Tenant & Credit

June 1st, 2010 · 10 Comments · Landlord & Tenant Board, Property Management, Rental Property

I can’t emphasize enough the importance of great tenants. Good to great tenants are in fact the cornerstone of any landlord business. The bad tenants will wreck your life, stress you out, and make you wonder what the hell you were thinking when  you decided to become a landlord. There are some landlords who do cater to the bad tenant demographic. If you asked them they’d tell you that they don’t but they do attract the unorganized, desperate renters with their rather dirty, broken apartments. No decent tenant with any choice would ever rent one of their places. If this is you, and you are having problems all the time, I highly suggest you revisit your business plan and regroup with a priority on attracting great tenants.

I wrote a post over about the art of tenant selection at Million Dollar Journey about how to select the best tenants.

One of the things I mentioned in my article was using a credit check as an important screening tool. In fact it is the most important tool in the landlord’s arsenal. How else are you going to verify your application? I have seen many an application with just friends’ cell phone numbers to verify employment and landlord. Furthermore with existing privacy laws the larger companies who comply won’t tell you a thing. If you call Bell Canada for example they’ll just say that they cannot tell you if the person works there or not. I have also seen my share of faked job letters so I don’t put to much credence in them either.

One of the ways that tenants who have burned a lot of bridges manage to find a place is to find small private landlords and rent from them. As a first time landlord you are especially vulnerable to these kinds of characters. Not only do you lack the practice required to spot these deadbeats, you don’t have the tools you need to ferret them out. You don’t even have access to credit checks.

When I initially started my business I had to qualify for my right to perform credit checks. The process took two months and Transunion came out to my home office to verify that I had a secure computer system, shredder, and that I had a legitimate company. I then had to pay them a $400 deposit and I pay them another $240 per year plus I have to pay them every time I do a credit check. So how I ask you is a small landlord going to do that? The answer is they can’t really do it and it’s not affordable.

How can the small landlord protect themselves? Well it turns out there is a solution. There happens to be a company called Tenant Verification Services that landlords can use to be able to do credit checks on potential tenants. Now the process to get approved can be a bit of a pain, but they promise to be quick about it and that is essential. If you happen to have a place for rent this month you don’t really want to wait a couple months before Transunion or Equifax gets around to doing their site visit. Not only that these large companies don’t want to be bothered with thousands of small landlords, you have to have many properties before they’ll even consider letting you use their system.

One of the best things about Tenant Verification Services is that membership is FREE and you only pay for each credit check you do. There is no annual fee like I have to pay. You should sign up in advance because you do have to provide them with information which they have to collect because of privacy laws and concerns. Basically they don’t want anyone who doesn’t have permission running random credit checks on people.

So if you’ve been wondering how to get credit checks on people and how to protect yourself now you are a little better informed.

Happy Renting !!!

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10 Comments so far ↓

  • Simon Piskaret

    There is also a company in Toronto, serving Landlords, called Rent Check Credit Bureau. Credit Checks and Tenancy Checks can be done on Canadian and US individuals.

    Simon

  • Rachelle

    Rent Check is a viable alternative for landlords but they charge a membership fee which TVS does not. Maybe they make up for it by charging less for credit reports.

  • Jerry

    I don’t remember how I got the free membership at Rent Check

    but I have been happy with them, and their credit checks are cheaper than TVS too. They also have other reports (scores, balanced report, etc..) at a la carte price

  • Rachelle

    TVS or Rentcheck…

    Small landlords definitely need to check tenant’s credit, it’s one of the only ways left to protect themselves.

  • Finding New Tenants: Part 4

    [...] out Rachelle‘s excellent post on this. She recommends Tenant Verification Services, which I don’t find as enticing as she does. I joined the Landlord’s Self Help Center [...]

  • george mcdonad

    HI DID YOU KNOW THAT USING A CREDIT BUREAU TOO SOLEY USE AS A SOURCE OF EVALUATING A TENANTS CREDIT WORTHYNESS IS WRONG AND YOU ARE FACING A LAWSUIT AND TROUBLE FROM THE HUMAN RIGHTS BOARD….LET ME SHOW YOU WHAT IS LEGAL AND SAY THINGS DIFFERENTLY ON YOU WEBSITE…GET RID OF THE CAN OF WORMS IN YOUR WORDING ON THE SUBJECT…I CAN HELP YOU THANKS MR. MCDONALD CAPLINC CANADA

    • Rachelle

      Dear George,

      I’m not sure you’ve noticed but I’m not really worried about being sued. It’s only one of the criteria for evaluating tenants.

  • Sarah Bobby

    There are other companies that do the same thing.

    free membership also. You should not promote one company as the only one unless you are getting a kick back from them. I suggest you do your research.

  • Dave

    Just to add some more detail from my own experience as to why credit is so important. At some point your tenants will have their vehicle break down leaving them with a big repair bill or they’ll have an unexpected vet’s bill for that dog they didn’t disclose on the rental application form. It’s not just about delinquency and past behaviour, at times like these you don’t want to be left as their only source of “credit”. I didn’t fully appreciate this aspect of until I got caught out.

    • Rachelle

      True that, I once had a tenant on a payment plan who had a child with expensive cancer medication. Credit indeed. Good way to put it.

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