Is Your Rental Applicant a Wolf in Sheep’s Clothing?

Part 1: The role of credit checks in tenant screening.

By BreAnn Stephenson

Last time, I wrote about developing a thorough rental application and how it can help you place great tenants in your properties. But having a strong application is only half the battle.

It’s crucial that you call prospective tenants’ references and previous landlords to verify the information presented on their applications.  Checking their backgrounds for any criminal history and pulling their credit report are the other pieces that bring everything into focus.

By cross-referencing the information provided on the application with the results from the background and credit checks, you can confidently assess if an applicant is being truthful or is actually a wolf in sheep’s clothing. By fully screening each applicant, you can greatly increase your odds of placing tenants who will take good care of your investment.


Your first hurdle in verifying an applicant’s criminal or financial history is the U.S. government. In order to protect consumers, the U.S. Fair Credit Reporting Act restricts the use of information obtained from a background check. This is why your application needs to include a statement authorizing you to pull tenants’ credit reports and conduct any inquiries necessary to verify the accuracy of the information they have submitted. As I mentioned in the previous article, Bigger Pockets’ authorization statement is a pretty strong one, but there are others out there that may serve your specific purposes as well or better.



Does anyone like pulling their credit report? Even if your financial history has been squeaky clean, it always feels like there is going to be a monster hiding there. While false information can show up on a potential tenant’s credit report, you should still be able to gather what you need. The report will show you information regarding the following: open or closed credit lines, car payments, any monetary judgments, on-time or late payments, and more. If there are other adults who will be living with the primary lease-holder, be sure they pass your credit standards, too.


First, see what addresses are listed on the report. Do they match the application? Are there any addresses that are absent? If any information doesn’t match up, ask your prospective tenants to clarify, as they may have made an honest mistake. On the other hand, if they hesitate to give an explanation, that may be a red flag.

Also, observe how many addresses the prospects have had in the last five years. If there are many, your potential tenants might not stay at your property for very long either. High turnover does nothing but eat into your profits and expose you to the risk of vandalism in between tenants.


Different types of debt collections are indicated on a credit report. Medical collections, for example, may be something that even the best prospective tenants couldn’t avoid. Still, large and outstanding medical expenses will be yet another financial stress on them, so take that into consideration when you look at their ability to pay on a timely basis.

Other collections can be large red flags, too, particularly if a tenant owes money to another landlord or apartment complex. . Also, pay attention to cellphone collections and vehicle repossessions. They are strong indications that potential tenants cannot handle their money very well. Often, cellphone collections are the result of a skipped contract. You want to be sure they won’t skip out on you, too.


You will want to scan this section of the credit report for the number of recent inquiries. It is reasonable to see other apartment complexes looking into your prospects’ credit, as your potential tenants are looking for a new place, but if there are quite a few inquiries, your prospects may have been declined previously.

Watch out for multiple inquiries from car loan companies, cellphone companies and the like.  This may demonstrate an unhealthy spending pattern or indicate that your applicants are already in financial trouble.


It’s possible to build a good credit history on as few as two accounts, if those accounts are kept paid. Doing so can easily get someone to a credit score above 700. If an applicant has more accounts over a longer period of time, but they are all in good standing, that is a much better indicator of the applicant’s long-term ability to remain current on any outstanding balances. Whatever the history, balances should show as being paid on-time, and the report should reflect more good accounts than bad ones. Don’t be confused if a payment is shown, but there is no balance. This simply indicates a paid-off account.

These sections can give you a good idea as to what else they are paying per month. By subtracting those amounts from their verified income, you can get an idea of what is left after paying other debtors. After that, you may also want to come up with average figures to plug in for utilities, groceries and the like. With some simple math, you should be able to come to an estimation of how much “breathing room” an applicant is likely to have, so that they are able to pay you.


If there is something that confuses you or seems contradictory when you review an applicant’s credit report, simply ask the applicant about it.  As I mentioned earlier, it is not uncommon to find errors on a report, and your potential tenant may have a reasonable explanation or may want to get the information corrected.

By asking, you will also be able to confirm any suspicions by gauging potential tenants’ responses to your questions. Do they avoid eye contact? Do they give you excuses or an answer that is still unclear? If there is any element of distrust, make note of it and bear it in mind as you narrow down your choices. You don’t want to spend the entirety of your landlord-tenant relationship nervous about their ability to pay or if they will leave your property a mess when they leave—or even worse—when you have to kick them out!


Credit reports include a lot of information, so take the time to learn how to read them. Two of the primary reporting agencies offer checks just for screening tenants.  TransUnion has a product called SmartMove, and Experian Connect makes it easy for potential tenants to check and share their credit with potential landlords. Anyone can obtain a copy of his or her credit report for free from, but be cautious when using documents that applicants give you. Thanks to Photoshop, almost anything can be faked.

Next time, we’ll discuss the role of background checks in the screening process.

Article Compliments of Community Investor Magazine.

BreAnn Stephenson is the assistant vice president of Affinity Loss Prevention Services.