Owning and operating rental properties can be either simplified or exacerbated depending on the tenants a landlord chooses. As such, landlords want to select the most qualified tenants to rent their properties. To make the right decisions, landlords need to be aware of what is and isn’t allowed during the screening process. For example, many landlords wonder whether they can use credit scores for tenant screenings.
In this article, we’ll cover the legality of using credit scores, as well as several other screening techniques landlords can use to choose the right tenant.
What is a Credit Check for Tenants?
For a prospective tenant, a credit check can be a typical part of the screening process that takes place when the individual wants to rent a piece of property. It’s a common part of the application and screening process because using credit scores for tenant screening enables landlords to make informed decisions about whether the potential tenant is a good fit.
Credit checks provide landlords with valuable information, such as whether the applicant regularly pays their bills on time and their credit score. The reports generated from these checks can also show how much debt an applicant has compared to their income, as well as point out other financial issues that may interfere with their ability to pay rent.
Can Virginia Landlords Use Credit Scores for Tenant Screenings?
According to Virginia law, landlords are allowed to use credit scores for tenant screenings, but to do so, several conditions must be met.
For one, before a landlord can run a credit check on a prospective tenant, he or she must obtain written permission from the tenant in question. In addition to acquiring written permission, the landlord must also provide the potential tenant with a copy of the report if the individual requests it.
Landlords can use credit scores to help them determine whether they should rent to a tenant. However, when the applicant’s score is low, landlords are also required to consider evidence pointing to the applicant being a victim of family abuse. Such evidence may include:
- A letter from a domestic violence program, certified housing counselor, or attorney representing the tenant
- An incident report from law enforcement
- A court order
Finally, if a landlord wants to perform a credit check on a potential tenant, the cost of the screening must be covered by the tenant’s application fee. In Virginia, landlords cannot charge more than $50 for an application fee (or $32 if the unit is regulated by the US Department of Housing and Urban Development).
What is Allowed for Tenant Screenings?
In addition to using credit scores for tenant screenings, Virginia landlords are permitted to use a series of other screening criteria to determine whether they’re going to approve a tenant’s rental application. Tenant screenings can also include the following:
- Criminal history checks: to ascertain whether the applicant has a criminal history, especially one involving violent crimes
- Income or employment verification: to determine whether the applicant has been at the same job for over 6 months, or has a reliable source of income
- Rental and eviction history: to discover information about the tenant’s rental history and what past landlords’ experiences were like with this tenant
- Reference checks: to learn about what various personal and professional individuals in the tenant’s life have to say about him or her
Pros and Cons of Using Credit Scores for Tenant Screenings
Using credit scores for tenant screenings can seem like a no-brainer for landlords. However, it’s important to be aware of the positives and negatives that come with using this screening method to determine the appropriateness of a potential tenant.
Let’s look at a few pros and cons.
PROS
- Credit checks help protect landlords from signing leases with tenants who will be unlikely to pay rent reliably
- Credit checks provide landlords with valuable insights they can use to determine how responsible a potential tenant is
- Credit checks make it easier to determine whether a potential tenant can consistently afford to pay rent
- Credit checks can help verify the information that tenants provide on their rental applications
CONS
- Credit reports can be difficult to interpret, and if the right criteria aren’t evaluated, these reports can lead landlords to the wrong conclusions
- Credit scores are not a sufficient indicator on their own. Landlords need to consider the content of the entire report to make an informed decision.
- Credit scores can differ depending on the reporting agency
- Credit reports should not be used as a single way to determine whether a landlord should rent to a tenant. These reports should be used in conjunction with the array of screening techniques the landlord uses to paint a broad picture of the tenant’s history.
What To Look for in a Credit Check
If you’re a landlord and you’re new to using credit scores for tenant screenings, you might be unaware of the sort of information you should be looking for in your applicant’s report. As mentioned above, credit reports should not be your only factor when it comes to approving or denying a tenant’s application. However, it’s a good idea to be aware of the red flags to look out for when you’re reviewing this segment of the screening process.
Here are a few causes for concern when you’re looking at an applicant’s credit report:
- Low credit scores
- Accounts with late payments
- Significant gaps in payment history
- Derogatory marks
- Delinquent accounts (especially when it comes to rental history)
- Extensive debt
Pulling credit reports can provide landlords with valuable insights into whether a potential tenant is right for their property. However, it’s important to follow all of the rules associated with this part of the screening process. Laws change occasionally, so if you’re a landlord, make sure you take the time needed to ensure that you’re compliant with housing laws when you’re screening potential tenants.
