Credit Reporting and Proof of Income Documents for Prospective Tenants

A tenant’s credit report is one of the most important data points a landlord has, along with proof of income documents. Why? 

The #1 issue a landlord can face is non-payment of rent. And in the areas I work, namely Cambridge, Somerville and Medford, you are often looking at very high mortgage payments on your property and very high rents. If you have a $7,000/month mortgage and your rent is $4,200/month, even missing out on 1 or 2 months can be disastrous.

Additionally, Massachusetts is one of the most tenant-friendly states in the country and evictions can take multiple months of back and forth and thousands of dollars in legal fees.

You put it all together and the risk of rent non-payment is just really scary for most landlords. And this is where credit reports and proof of income are critical.

I have found that credit reports and income-to-rent ratios tend to be some of the best predictors of whether a tenant will pay rent and pay rent on time. Is it a perfect science? Absolutely not. Should you look at the full 360 degree view of a tenant when making a decision? Absolutely. If the data points are shaky and the potential tenant has reasonable explanations, then it’s important to keep an open mind, especially if the rest of the application is strong. However, you would be taking a big risk by totally discounting these data points. 

For all applications I run, I compile credit reports and income-to-ratios for my landlord clients. If you’d like more information on how I run applications, give me a buzz!