How To Read A Credit History
While the credit score has emerged as an important factor for property owners and managers to consider when they assess the creditworthiness of individuals who have applied to rent housing, the credit history still also merits close examination.
Credit histories, which contain the data that's used to calculate the credit score, are maintained by the nation's three large credit bureaus: Equifax, www.equifax.com, Experian, www.experian.com, and TransUnion, www.transunion.com. Credit experts (and, incidentally, companies that sell credit histories) recommend that landlords obtain a report from each of the three bureaus since the information reported to each one may differ from the information reported to the other two. A "merged" or "three-in-one" report combines information from all three of the bureaus.
A credit history typically includes personal information, public records data, a list of current and prior credit accounts, and, depending on the type of report, a list of recent "inquires," or requests, for the credit history.
Personal information usually includes the individual's date of birth, driver's license number, Social Security number, telephone number, and current and previous known addresses. Savvy landlords ask rental applicants to explain any discrepancies between addresses listed on the credit history and the rental application. An address that appears on the history, but not the application might signal an eviction or other irregular termination of residency at that address.
Public records data include bankruptcy filings, real estate foreclosures, monetary judgments and tax liens. On a high-quality credit history, this section will be blank.
Credit accounts include mortgages, auto loans, credit cards, and department store or other retailer's charge accounts. Joint accounts held by married couples should appear on both of their credit histories. Accounts held by one spouse individually wouldn't appear on the other spouse's history.
The credit bureaus generally use codes to present information about these accounts in an abbreviated format. For example, accounts might be coded as "I" for individual, "J" for joint, "C" for cosigner and so on. Be sure to refer to the key to the codes that should accompany the history because without the key, it can be very difficult to guess what the codes mean.
Smart landlords pay attention to the ratio of account balances to credit limits, the total amount of minimum and fixed monthly payments, the number of newly opened accounts and whether accounts have been paid on time or late. These factors indicate whether the rental applicant is able to manage credit and pay his or her obligations when they are due.
A "thin" credit file that doesn't contain much information might mean the individual has had little or poor experience with financial matters. A consistent record of on-time payments should be a good indication of the individual's intent to pay his or her rent on time as well.
Few consumers will be able to explain why their own credit score is what it is, yet specific questions about an individual's credit history may elicit useful and telling information about financial habits and behaviors. Ask for details about adverse public records data, closed credit accounts, late payments and other red flags.
Don't assume that all of the information in a credit history is accurate. Creditors sometimes submit erroneous data and the bureaus themselves sometimes make mistakes. It's also possible that two or more individuals who have the identical name or similar names may have mixed-up information in their credit files.
Consumers also can add their own statements to their credit file if they wish to dispute the information. These statements are noteworthy, but they also reflect the credit bureau's refusal to remove the information and determination to stand by its accuracy.
Copyright 2006. Marcie Geffner. All rights reserved.
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