How to Analyze Renter Credit Worthiness

When you are renting out your property, whether it's a small apartment, a three-bedroom home or large commercial space, chances are you are concerned about renting to responsible tenants. Not only do you want someone who is going to care for the property, but you want to feel secure that you're going to get your rent payments on time and in full each month. One way to predict whether a tenant will be financially responsible is to analyze her credit report. While credit reports are not 100 percent accurate, a report will give you a good idea of whether a tenant can handle the monthly rent payments.

Instructions

1

Confirm that the information on the report matches the information on the application. Credit reports reveal previous addresses and names. If the information on the report varies significantly from that on the application, the applicant may be hiding something, and you need to ask more questions.

2

Calculate the renter's debt-to-income ratio. Add all of the applicant's monthly debt payments together, including the rent you charge, multiply by 100 and divide the result by her annual income. In general, monthly debt payments -- credit cards, loans and rent -- should not be more than 36 percent of monthly income.

3

Track the applicant's payment history. Credit reports generally include the monthly payment history for at least the previous year. Look for payments 90 days late, or longer. If the applicant has a pattern of late payments, or several accounts not current, she may be a risk.

4

Review any accounts that are in collections. Collection accounts are not necessarily an indication of poor credit. For example, a hospital may send a large medical bill to collections even when the patient is making regular payments. Instead, look for an overall pattern of collections activity, and ask for an explanation of any items that seem out of place.

5

Assess the renter's overall debt amount. Look for credit accounts that are at or near the limit, a high number of recently opened accounts or other signs that the applicant may be living beyond her means.