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Credit Reports: Why They Don't Work

5 Reasons Credit Reports Don't Work

By John Nuzzolese

credit reportWhat??? Credit reports don't work? This must be a joke, right? Tenant credit reports are one of the most important screening tools in the rental housing industry.

In order to secure a good tenant for your rental, it is critical that we practice proper tenant screening. This includes verification of all the reference information on a detailed tenant rental application. A credit report is an important final step of verifying the tenant's financial history, or track record.

Credit reports contain important factors in evaluating a person's creditworthiness. Creditworthiness, of course, is what you are looking for if you plan to hand over your rental property to someone.

So What Are "5 Reasons Credit Reports Don't Work?"

  1. Making your decision based on how you feel about the prospect

    It happens every day. You show your rental property to someone you really like. They seem so nice and you leave the appointment feeling like you've got this deal in the bag. It could be a nice friendly couple you seem to have hit it off with, or a friendly guy who seems too good to be true. They may ask questions like, "Is it OK if I plant a few flowers in the garden?", or "Do you mind if I fix small things that need fixing?"
    Although it's great to find a tenant you like, that is only one factor. You still will need a good understanding of his or her credit history.

  2. Relying soley on the credit score

    credit report

  3. Forgetting that a credit report is only one of the deciding factors.

    If you feel the person is untrustworthy, irresponsible or just a plain jerk, that is a major factor for you to consider, even if the credit report is good.

    credit report

  4. Not verifying the identity of the applicant

    You MUST MUST MUST verify the prospect's identity! Ask to see a driver's license and also get or make a copy of it. Always make sure the person you are screening is the same person on the credit report.

  5. Not understanding how to read a credit report

    If you don't understand the jargon and codes in an average credit report, don't feel bad. It's easy and the following link will help you understand and be able to analyze credit reports and make good screening decisions.
    How to Read and Understand a Credit Report Step by Step

Credit reports do work and are one of the most effective financial screening tools in the real estate industry, but as with any other tool, such as a hammer, it must be understood and used properly to be most effective in tenant screening.

Screening Tools for Before the Credit Report

  • Tenant Finder Pre-Screening Telephone Worksheet
    or The LPA Pre-screening Prospect Card (with html code for Internet ads)

  • The LPA Rental Application

  • The Landlord Reference Qualifier

  • Credit Reporting Disclosure Notice

  • Tenant Finder Qualifier Chart

  • About the author:
    As a Real Estate broker / investor in New York, John Nuzzolese has been involved with rentals and investment property since 1979. Besides owning and operating two real estate businesses, he is president and founder of The Landlord Protection Agency, Inc. , an organization specializing in helping landlords and property managers avoid the hurdles and pitfalls and expensive blunders common when dealing with tenants.

    More information on The Landlord Protection Agency is available at

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