Credit Reports for Collection Purposes

Can I Run a Credit Report to Locate my Tenant who Owes me Money?

A common misconception landlords have is that they can run a credit report on a tenant if they have the tenant's social security number. You must have the applicant's written authorization explicitly for running a credit report. It is illegal to pull a credit report without the tenant's written authorization according to the FCRA (Fair Credit Reporting Act). There could be very serious ramifications if you order credit reports without written authorization.

So, what if you have written authorization on your tenant's rental application to run a credit check?

As you know, it is illegal to pull a credit report on a rental applicant without his or her expressed written authorization. The same is true for banks and credit card companies, only they have you sign an authorization that allows them to continue to check your credit report.

Most lending institutions run credit reports from time to time on their borrowers for various reasons. Sometimes, to determine eligibility for credit line increases or account renewals, and also to track down delinquent debtors.

Why can't landlords do the same thing? They can, but most landlords are not legally prepared to do it.

Here is the clause to insert into your LPA Rental Application, so that if in the future you have to chase down a tenant by checking his credit report for a forwarding address or employer.

<!-- Start Copying here --> I HEREBY AUTHORIZE LANDLORD/AGENT TO VERIFY THE VALIDITY OF ALL THE ABOVE INFORMATION, AND TO INQUIRE NOW OR PERIODICALLY WITH MY EMPLOYERS, FINANCIAL INSTITUTIONS, AND ANY OF THE CREDIT REPORTING BUREAUS AVAILABLE TO HIM. I AGREE TO SUPPLY ANY ADDITIONAL INFORMATION NEEDED BY OWNER/AGENT TO PROCESS THIS APPLICATION AND I ACKNOWLEDGE THAT MY DEPOSIT WILL BE FORFEIT IF I DO NOT COMPLY WITH ANY SUCH REQUEST. I AGREE THAT MY SCREENING FEE OF $ ______ IS NON-REFUNDABLE. <!-- End Copying here -->

Just copy and paste the above updated clause into your LPA Rental Application over the original.

Even with the permission to run ongoing credit reports on your tenant, the you should keep in mind that each report you pull will show up on the credit report as an inquiry. Excessive inquiries on a credit report are harmful to the subject's credit rating. The landlord must be responsible with this privilege which is only intended to protect the landlord in collection or renewal evaluation circumstances.

Disclaimer: State and local laws may vary, so The LPA recommends you seek an attorney's advice before ordering additional credit reports on tenants.

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 www.theLPA.com

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