As professionals in this industry for over 30 years, we have seen the challenges property managers, real estate agents, and landlords face when trying to make the best decisions in a fast-paced world.
An applicant’s credit report can seem like the strongest determining factor in whether or not they are the right fit. Navigating through all that information can be overwhelming and not easy to decipher for the untrained eye.
Here we outline the six most frequently asked questions we receive about credit and that there’s a bigger picture about an applicant to consider before making your decision.
What is a FICO score and how can it help you make smart tenant decisions?
FICO is one of the most well-known types of credit score. It stands for Fair Isaac Corporation and it’s a three-digit “grade” based on the information in your credit report.
There’s a lot that goes into calculating a FICO score. It considers the amount of debt owed, payment history, length of credit history, new credit, and the mix of credit types.
A “good” FICO score is 700 or above ( 800+ is considered excellent).
What information is included in a credit report?
An applicant’s credit report includes a lot of data for a high-level view of spending and payment behavior. This includes payment history, whether payments were made on time or were past due (at least 30 days late), and both open and closed accounts.
Why closed accounts, you ask? Well, they can offer a lot of insights too, especially since they stay on a report for 10 years. You can see your applicant’s payment patterns for loans as well as habits of opening and closing lines of credit, or having accounts closed by lenders, etc.
What types of accounts show up on a credit report?
There are three different types of accounts (aka tradelines) you might see on a credit report:
- Revolving Credit: Credit cards and retail cards with a set credit limit should be paid off in full or have minimum monthly payments on made on time to maintain good standing
- Installment Accounts: Student loans, car payments, mortgages, secured and unsecured loans with fixed payment amounts and dates based on the term of the loan.
- Open Credit: These accounts allow a maximum level of borrowing and must be paid in full every month. While similar to a revolving credit account, if they do not have a monthly payment required, that account will show under current monthly obligations. Some American Express accounts are a common example of an Open Credit account.
What is considered a late payment and are they important?
When you’re reviewing an applicant’s credit report, you might see that they have some late payments. The first thing to know is that a late payment is reported to the credit bureau after 30 days from the due date. Credit reports will show if the payment is 30, 60 or 90 days past due. While you might take this as a sign that your applicant isn’t the most responsible with their financial obligations, at Inside Credit, we ask you to dig deeper than payment history.
Have you ever contested a charge and refused to pay until a bill is amended?
Have you gone through a divorce or know someone who wasn’t able to pay bills because assets weren’t accessible? These situations happen to many of us and discerning between these types of cases is one of the things we do best.
What information do my applicants need to provide for a credit report?
We make the process as streamlined as possible and your applicants only need to provide the following:
- Name – Include any name variations they’ve used in the past such as with or without a middle name/initial, nicknames, or surnames used prior to marriage or divorce.
- Address – If they have recently moved, it’s best to include prior addresses.
- Date of Birth
- Social Security Number – Privacy and online security are a top priority so this information is immediately encrypted
Is it safe for my tenants to provide their social security numbers to Inside Credit?
Privacy and online security are a top priority for us at Inside Credit.
This information is immediately encrypted and used only to run the credit check. It’s not even shown on the tenant’s credit report! It’s one of the reasons our agents and property managers alike rely on our services to screen potential tenants. We are extremely cautious when it comes to handling sensitive information and we want you and your applicants to feel safe working with us.
The credit score is only one component of understanding an applicant’s ability to pay. And it’s critical for you to have all the information AND be able to interpret it to make the decisions that can make or break your business. Be sure to snag our list of to help you make smarter tenant decisions.
Give us a call to discuss our full suite of services to help your group make smarter tenant decisions. Our individualized summaries provide a clear picture of what is history and what is habit so you can see beyond the credit score.