As a landlord or property manager, you may be focused on keeping your expenses as low as possible, and you may understandably jump at the chance to save money on tenant screening services. A key aspect of tenant screening involves pulling a credit report so that you can review the FICO score and so that you can see the potential tenant’s actual expenses. By doing so, you are checking on the creditworthiness of the potential tenant as well as his or her ability to pay the rent and all other monthly obligations. However, when you buy a cheap score, you may actually not be looking at the FICO number at all.
Not All Credit Reports Are the Same
The unfortunate reality is that not all credit reports that landlords can purchase are the same. Some credit reporting companies are attempting to sell you the “educational score” rather than the actual FICO score. The educational score is derived off of different data than the FICO number is derirved from, and it is the FICO number that lenders and others will use when making a credit decision. With this in mind, you can see that you need to be looking at a FICO number rather than an educational number.
What Is a FICO Score?
FICO is an acronym for the Fair Isaac Corporation, the creators of the FICO score. There are three main credit bureaus, and these are Transunion, Equifax and Experian. Keep in mind that credit card companies, mortgage companies and others are not required to report information to all three bureaus, and some may only report information about a consumer to one or two bureaus. This partly explains why each of the three bureaus may have different scores for the same individual. In fact, the three bureaus rarely have the same information or the same score for an individual. If you are only getting one of the educational scores, you are not getting the full picture of the individual’s creditworthiness. Remember that a FICO number will always say FICO next to it while others may only indicate a credit score rating or a rating from one of the three bureaus.
Tenant screening is an important part of your job as a landlord or property manager, but you need accurate, up-to-date and comprehensive information in order to make the most informed decision possible about your potential tenants. Take time to verify that the credit reporting agency you are using to purchase your reports from will provide you with the actual FICO number and not an educational score.