When assessing a prospective Tenants credit check there are key things that you want to look for:
- Does the credit file have more than 1 enquiry?
The very first thing to check is the number of enquiries, if there is only 1 enquiry and the age of the credit file is 0 months, then this is a strong indicator that an error has been made in either the name or the date of birth when loading the information. Obtaining a copy of the applicants ID will help avoid making such errors. The only other time you will see a 0 month credit file age is when the applicant has just arrived into the country to live, in which case you should obtain proof of residency.
- What is the age of the credit file?
- Does the credit file have a substantial amount of enquiries?
- Is there any adverse credit?
- What is stated on the address history?
- What are the last 5 enquiries?
Having a look to see who the last 5 enquiries were made from and how long ago will tell you a bit about their current life. If you can see that they have several rental company checks in the last month this may be an alarm bell as to why they have not yet been approved. On the other hand you may find that the last 5 enquiries are spread over the last few years which is a good indicator of stability. Or you may find that they have been applying for mortgages and may only be looking to rent for a short period of time.
Credit checking is good industry practice and removes the emotion out of the decision. While every once in a while you may come across a good person who has just had a bad run, the majority of people who have bad credit history will likely prove to be bad rent payers. If you find yourself with an applicant who has adverse credit, but it’s not so bad that you would decline it, there are ways to minimise your risk. Offer them a 3 month fixed tenancy with a full 4 week bond, advise them that so long as there are no late payments and issues with care of the property, then they will be offered another 3 months with the same terms. After 3-6 months you should have a good idea of whether they will make good long term Tenants or whether you are better to end the tenancy and find fresh Tenants.