Rents in New York City keep breaking records. As a landlord, this is a historic opportunity. You can only take advantage of the trend in the rental market if you find good tenants, though.
Tenant screening is essential. A tenant credit check is an important part of the screening process. You can only take advantage of it if you know how to read a credit report.
Learn what to look for in a credit report and how to simplify your tenant screening.
What the Credit Score Number Means
Credit scores range from 300 to 850. A higher number means a lower risk for the landlord.
Credit reports use either the FICO or VantageScore model. Each model treats credit data differently. This makes the ranges for their rating categories somewhat different:
- 800-850/781-850
- 740-799/661-780
- 670-739/601-660
- 580-669/500-600
- 300-579/300-499
FICO categories range from exceptional to poor. VantageScore categories range from excellent to very poor.
Exceptional/Excellent
The risk of someone with exceptional credit missing a rent payment is extremely low. A person with excellent credit is likely to be a good tenant.
Very Good/Good
People with very good credit will most likely make good tenants too. Their credit history shows financial responsibility in most areas.
Good/Fair
People with good credit are somewhat less desirable as tenants. They're still more likely than not to be reliable, though. You can look at other aspects of the credit report to decide if the risk of missed payments is too high.
Fair/Poor
Fair credit scores are more risky. People with fair credit have had some financial issues in the past. They're more likely to miss rent payments.
Poor/Very Poor
Poor credit means a potential tenant is very likely to miss rent payments. Accepting a tenant with this credit score is a risk.
Using the Detailed Credit History
A credit report includes the prospective tenant's detailed credit history. This section is very valuable for tenant screening.
The detailed history tells you what other payments the tenant is making. You can see how someone's financial obligations compare to their income.
You can see more of the tenant's payment history. Late payments are a red flag. However, a few late payments in the past may not indicate a current problem.
Reading Between the Lines of the Credit Report
A tenant credit check is very important for tenant screening. It doesn't show everything, though. Sometimes you need to look deeper to see if someone will make a reliable tenant.
For example, many people lost their jobs when the pandemic started. They may have missed payments or overused their credit cards. If someone has now found a job and is rebuilding their credit, they're less of a risk.
Finding the Best Tenant Screening Services
Your tenant screening should include the applicant's credit report. A credit score helps you understand if someone is likely to pay rent on time. You can make a more informed decision about accepting them as a tenant.
In New York's competitive rental market, you don't want to waste time screening applicants yourself. PMI Paramount is a full-service property management company with a robust tenant screening process. We conduct a thorough background and credit check on each applicant.
Schedule a consultation today with PMI Paramount to learn more about our tenant screening services. Let us help you find the right tenants.
