Finding the best tenants isn’t always easy. As a landlord or property manager, you need to screen carefully and make an informed decision based on multiple factors. One key part of the tenant screening process is evaluating tenant credit checks. A credit report offers valuable information about a prospective tenant’s financial history, helping you decide if someone is likely to pay rent on time or become a potential risk.
This article explains how to make decisions based on tenant credit checks. If you want to ensure you're choosing reliable renters without violating fair housing rules, this guide will walk you through what to look for in a credit report while staying compliant with the law. So, keep reading.
Helpful Guide: How Credit History, Criminal History, and Income Affect Tenant Approval
Understanding how credit history, criminal history, and income impact tenant approval can help you make smarter screening decisions and reduce future risks.
- A tenant credit check shows how the applicant handles paying debts, but poor credit alone isn't always grounds for denial.
- Life events like a job loss or medical emergency may explain negative credit if the report shows signs of recovery.
- Criminal history must be handled carefully. Focus only on relevant convictions, and stay compliant with the Fair Housing Act and local laws.
- Income is a major factor. Tenants should earn 2.5 to 3 times the monthly rent, verified through pay stubs or employer contact.
- If income is low, a co-signer or strong rental history may still make the tenant a good fit.
When It Makes Sense to Say Yes
Here are situations where saying yes makes sense, even if the credit report isn’t perfect:
1. Strong Income and Employment
If the tenant-based application shows enough income (typically 3x the monthly rent) and consistent employment verified by pay stubs or direct contact with their employer, this can offset concerns about a low credit score.
2. Clean Rental History
A qualified tenant may have negative information on their credit report but glowing references from previous landlords. Timely rent payments and responsible behavior can hold more weight than missed payments on unrelated car loans or medical bills.
3. Extenuating Circumstances
Life happens. A job loss, medical emergency, or divorce can temporarily affect a person’s credit. If the tenant provides context and has been back on track, showing they can now pay rent reliably, you may consider them.
4. Willing to Use a Co-signer
An applicant with poor credit may offer a co-signer who meets income requirements and has a strong credit history. This provides security for the landlord in case rent isn’t paid.
When It Makes Sense to Say No
In other cases, a credit and background check may reveal red flags that justify denying the application.
1. Pattern of Non-Payment
If the credit report shows consistent late payments, defaults, or eviction-related court records, and the rental history confirms these patterns, this is a valid reason to reject an applicant.
2. Income Doesn’t Meet Requirements
If the potential tenant doesn’t earn enough to meet your general rule (e.g., 3x the month’s rent), they may not be able to afford the unit, even with perfect credit.
3. Major Debts with No Resolution
Large unpaid debts, multiple collections, or unpaid rent to a prior landlord could signal trouble ahead, especially if there’s no explanation or repayment plan in place.
4. Incomplete or Misleading Application
If a rental application is missing critical data or contains inaccurate information, you might not be able to assess the tenant fairly. This wastes time and makes the process more time-consuming.
Screening Section 8 Tenants: What California Law Requires
California law strictly protects tenants who use housing vouchers like Section 8. Under SB 329, landlords cannot deny applicants based on their voucher status. Vouchers are considered a lawful source of income, and income requirements must apply only to the tenant’s portion of rent, not the full amount.
Under SB 267, landlords also can’t deny Section 8 applicants based on credit history without first offering the chance to provide alternative proof of ability to pay. Acceptable alternatives include pay stubs, bank statements, or a history of on-time utility payments. You must inform applicants of this option and give them a reasonable amount of time to respond.
To stay compliant, avoid blanket credit checks for voucher holders and evaluate rental history or references instead. Apply your screening criteria consistently while respecting the added protections the law provides.
How to Stay Compliant with the Law
When using tenant credit checks to decide who gets approved, it’s important to follow local regulations, federal law, and the Fair Credit Reporting Act (FCRA). To stay compliant, always notify the tenant in writing if you plan to use a tenant screening company to run a credit and background check.
If you deny their application based on the results, the FCRA requires you to provide an adverse action notice. You must also avoid rejecting any applicant based on their protected class status, such as race, religion, family status, or disability, as outlined by the Fair Housing Act.
Most importantly, apply your screening process consistently and use the same criteria for all applicants to ensure fair and legal decision-making.
Tips for a Smarter Screening Process
To make better decisions and avoid legal missteps, keep these practical tips in mind during your tenant screening process.
- Work with a professional screening company. They can help you stay compliant with both local laws and federal law, making sure your tenant background check is thorough and legal.
- Consider more than just the credit score. A single number may not reflect the applicant's full financial situation, so take time to review all available details.
- Verify key details beyond credit. Check employment status, review pay stubs, and contact previous landlords to better understand the applicant’s reliability.
- Set a clear screening policy in advance. Define acceptable credit scores, income levels, and rental history in your lease agreement to avoid misunderstandings and reduce the risk of housing discrimination claims.
- Give tenants a chance to explain. If an applicant has poor credit, listening to their explanation may reveal valid reasons and show they’re working to improve.
Make Confident Tenant Decisions with the Right Credit Check Strategy
Choosing the right tenant doesn’t have to feel uncertain. With a strong screening strategy and a fair approach to credit checks, you can protect your rental property and place tenants who are more likely to pay on time and take care of the home. Reviewing credit history alongside verified income or past rental behavior helps reduce risk and support better outcomes.
At HBR Rentals, we built our services with purpose and vision. From the beginning, our goal has been to support property owners with smart systems and reliable solutions. If you're ready to stop managing everything on your own and want a partner who puts your needs first, we're here for you.
Call us today to learn how HBR Rentals can simplify tenant screening and give you peace of mind with every placement.
Frequently Asked Questions
1. Can I deny a tenant just because of a low credit score?
Yes, but only if it’s part of a consistent policy and not used to target a protected class under the Fair Housing Act. Always follow the Fair Credit Reporting Act rules.
2. How recent should a credit report be when screening tenants?
Credit reports should be pulled during the application process, typically within 30 days, to ensure the most accurate information.
3. Should I always use a tenant screening company?
Using a professional tenant screening company or screening company helps ensure compliance with federal law and local regulations, and saves you time during a time-consuming screening process.
