While we here at Rent Application cannot make judgement calls on applicants for you, we can help you understand how to interpret credit reports so you can make an educated evaluation of your potential tenant's creditworthiness.  

Credit Score

Credit scores are generally based on a range of 300-850.  Where your applicant's score falls on that scale helps you to determine their creditworthiness.  

The elements from your credit report that shape your credit scores are called credit-score factors. Some factors that may affect credit scores are:

  • Payment history
  • Types of accounts (credit cards, auto loans, student loans, mortgages and rent)
  • Percent of credit limit used (credit utilization)
  • Age of accounts
  • Total balances and debt
  • Number of inquiries

Please note that this score is affected by multiple factors, which are listed on the report.  For example, not having a long history of established credit can result in a lower score, even if the applicant's debts are paid on time.

Credit Score Variations

There are a few reasons why you might get different credit scores from Vantage and each of the three major credit-reporting agencies. Here are some of the most common situations:
  1. Scores are from different dates - Since scores might change at any time, it’s important to compare credit scores from the same date. You also don't want to base any risk assessment on old information.
  2. Scores are calculated using different scoring models - Keep in mind that there are dozens of credit scoring models out there that may calculate your score a little differently.
  3. Scores are calculated using different credit reports - Some lenders report to all three major credit agencies, but others report to only one or two. This means a credit agency may be missing information that helps or hurts your score.
  4. Free credit report websites aren't official scores - Free credit report services, like Credit Karma, attempt to estimate a score using a formula. However, it is almost always different from the credit bureau score at the time the report was ordered.
The score shouldn't vary greatly, but property representatives are encouraged to be careful about accepting any reports directly from the applicant. It could be altered or from a different date. 

Debt Summary

You will find a debt summary table underneath the score on the report.  This debt summary table provides a snapshot of all the applicant's debt payments.  You can evaluate their monthly debt payment amount in comparison to their income to help you figure out if the applicant is able to meet your proposed rent amount.  

Tradelines

The next part of the report contains the individual tradelines for all debts.  This includes credit cards, bills, mortgage and other payments. Tradelines listed may include active accounts and closed accounts.  You can use these to see more detail about each of the applicant's debts:

  • Missed payments:  Late or missed payments remain on credit reports for up to seven years from the original delinquency date
  • Charge-off:  When a creditor charges off a debt, they’ve decided they won’t be able to get the money owed and wrote the account off as a loss. The creditor may continue to report the past due amount and balance owed.
  • Collections: Debts sent to collection agencies stay on credit reports for seven years.
  • Settled accounts: A creditor may agree to accept less than the total amount owed.
  • Repossession: When a creditor reclaims collateral for a secured loan, the repossession appears on credit reports.
  • Voluntary Surrender: When a lender agrees to take a vehicle back at your request, your voluntary surrender will appear on your credit report as a derogatory item.
  • Foreclosure: Unpaid mortgage as agreed and the lender takes possession of the house.
  • Bankruptcy: For unmanageable debt, individuals may declare bankruptcy. For Chapter 7 bankruptcy, none of the debt included gets repaid; for Chapter 13, a portion of the total debt owed is repaid. 

At the end of the day, the decision is up to you. Please keep in mind that if you decide not to rent a property to an applicant due to information contained in their credit report, you may need to send an adverse action letter per the Fair Credit Reporting Act.