LANDLORDS BEWARE! DON’T RELY ON CREDIT SCORES ALONE As eviction moratoria begin to expire, the importance of doing a thorough tenant background check on prospective renters has never been more important. Property owners are increasingly aware of the need to protect themselves from tenants with collections, liens and evictions in their credit history and who may be unable to pay their monthly rent. Owners who previously relied on their intuition now realize that it can be dangerous to sign a lease with someone based purely
on how they present themselves. Many landlords, even those who have been ordering tenant credit reports for years, will run one on a prospective lessee and then completely ignore it. They are only interested in the accompanying credit score. Unfortunately, these property owners run the risk of renting to someone who is undesirable based on circumstances not revealed by that score alone. HOW IS A CREDIT SCORE COMPUTED? A credit score is based on an individual’s financial history. It is basically a number calculated to reflect the details in their credit report, including installment obligations, past- due payments, collections, bankruptcies, hard inquiries and other public records.
Payment history (35% of the score). Are payments made as agreed? The credit score consists of five factors: 1
2
Credit usage (up to 30%). How much does the individual use their available credit?
3
Age of open accounts (15%). The longer one’s credit history, the higher their credit scores.
Types of accounts (10%). A diverse range of credit accounts is actually desirable.
4
5
Hard credit inquiries (10%). Too many new accounts or inquiries can indicate increased risk.
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