Running a rental property can quickly turn sour if you don't have the right tenant screening in place. A tenant who can't afford the rent can cost thousands in eviction fees, missed rents, and property damage, along with the mental stress.

Finding reliable tenants is especially important since cases of fraud have skyrocketed in the past few years, with 70.7% of landlords surveyed reporting a jump in fraud in recent years. With AI tools, making fake documents has become even easier.

The solution? A credit check.

While criminal and background checks can help you find tenants who have a good standing, income matters just as much. Credit checks help you determine whether a prospective tenant has sufficient financial stability to rent your property.

But how can you go about it? This guide explains how to run a credit check on a tenant, including the steps, laws, and tools you need in 2026.

What is a Tenant Credit Check and What Does it Reveal?

A tenant credit check reveals how reliably a prospective tenant has handled money in the past. This enables you to understand how dependable they could be for paying you rent in the future.

The reason?

A tenant could be earning well and may be financially solvent, but still have a bad credit history. Instead of taking their claims at face value, you can use credit checks to verify if they’re telling the truth.

The credit check will show you the tenant’s exact financial picture.

What a Tenant Credit Check Includes

A tenant credit check involves a soft pull from credit bureaus that doesn’t affect the applicant’s credit score. It gives you access to some critical information, such as:

  • FICO/VantageScore: A measure of the prospective tenant’s creditworthiness.
  • Payment history: A detailed history of their past rental payments, including on-time and late payments.
  • Debt-to-income ratio: Shows you how much debt the person has racked up against their income. A lower ratio is better.
  • Civil records: Includes public records, such as bankruptcies, judgments, or other filings.
  • Employment history: Shows you the prospect’s current and past job roles to understand their financial stability.

Tenant Background Check vs. Tenant Credit Check

A tenant background check is the complete, comprehensive check, including eviction history, identification, and criminal history. These reports include felonies, misdemeanor convictions, sex offender status, and past eviction filings or completed evictions. It answers questions like do they have a history of breaking the law?

A credit check, on the other hand, solely revolves around the prospect’s ability to pay rent by checking their credit history.

Step-by-Step: How to Run a Credit Check on a Tenant

Running a credit check on a potential tenant is non-negotiable. It gives you greater insight into the person’s financial history and greatly reduces the risk of default or fraud. But how can you go about this process?

After all, there’s so much information to unearth, and you’d also need to approach credit reporting bureaus to collect their past credit history.

Here’s a detailed, step-by-step guide on how to run a credit check on a prospective tenant:

Step 1: Establish objective, non-discriminatory rental criteria (FHA compliance)

It’s essential to start off the rental process by defining your “ideal” tenant. You should assign hard numbers to their credit scores (for instance, a minimum of 650). Similarly, decide the minimum income-to-rent ratio. These figures will serve as the baseline for determining if a tenant meets your requirements financially.

It helps you eliminate personal bias and gives you an objective way of judging every applicant. That said, you must consider the Fair Housing Act (FHA) while coming up with the rental criteria.

It means you can’t discriminate against potential tenants based on their race, color, national origin, religion, sex, familial status, or disability.

Step 2: Require a standardized rental application

Once you’ve decided on your rental criteria, it’s time to create a standardized rental application. This step helps ensure that you collect the right set of details and they’re uniform for every single prospect. Some of the information you should ask for includes:

  • Full name
  • Social Security Number
  • Employment history
  • Previous landlord references

That said, don’t make the application overly long, and also stay away from “extra” questions that could breach the FHA non-discriminatory stance.

You just need enough details to pull data from credit screening services.

Step 3: Obtain written or digital consent (FCRA compliance)

Before you can run a credit check on a prospective tenant, you’ll need to obtain their written or digital consent. That’s because the Fair Credit Reporting Act (FCRA) legally requires you to get an applicant’s permission to run a credit check. You also need to provide a clear disclosure stating the reason for accessing their credit history.

Pro Tip: Keep these authorization forms on file for at least two years. If an applicant ever disputes the inquiry on their credit report, you’ll need this proof to avoid legal penalties.

Step 4: Choose a reliable property management software or screening service

Next, it’s time to request the credit screening report. Unless you’re managing hundreds of units as a property management agency, you likely won’t have direct access to credit bureaus like Experian and TransUnion.

So, if you’re wondering how to run a credit check on tenants as a DIY landlord, a property management solution is the answer.

Pro Tip: TenantCloud lets you request credit reports from major bureaus and agencies. You can request the tenant's details through the platform, and the tenant can pay the screening fee directly. The reports show up on your dashboard for easy sorting.

Step 5: Review the generated report for red flags (late payments, high debt)

Once you receive the credit report, look at the credit score first. Then, dig deeper. Analyze their debt-to-income ratio. A lower ratio means the prospect has a healthy balance, making them more solvent for paying rents.

Additionally, look for specific patterns:

  • Late Payments: Are they chronic or related to a one-time emergency?
  • Public Records: Check for bankruptcies or active judgments.
  • Credit Utilization: Do they have high balances on revolving credit cards?

If you do decide to reject a tenant based on this report, you’ll have to provide an Adverse Action Notice, which must clearly specify why they were denied. You’ll also need to provide the contact information of the credit bureau used.

Navigating 2025 and 2026 Tenant Screening Laws

Tenant credit screening is subject to both federal and state-level laws. These laws aim to increase transparency and lower barriers to rental for applicants. As a landlord, you must comply with these regulations, so let’s take a look at them.

FCRA and Adverse Action

The FCRA forms the bedrock of tenant credit screening. If you take any action, such as increasing security deposit, requiring a co-signer based on their credit background, or rejecting their application, you’re taking an adverse action.

To comply with FCRA, you must provide an adverse action notice to the tenant, which includes:

  • Name, address, and phone number of the credit bureau that provided the credit report.
  • A statement that the credit bureau didn’t make any decision for denying the applicant.
  • Notice of the applicant’s right to dispute the credit report and request its copy for free within 60 days.
  • The applicant’s credit score, if used.
  • Notice of the applicant’s right to dispute the accuracy or completeness of the information provided by the credit bureau.

State-level Laws and Fee Caps

While FCRA applies to all states, some also have caps on application fees. These caps determine the maximum fee you can charge to cover costs like background and credit checks.

Here are the fee caps imposed by certain states in 2026:

  • California: $65.34 (adjusted annually via consumer price index)
  • New York: $20 (or the actual cost of background check, whichever is lower)
  • New Jersey (Starting May 1, 2026): $50 (inflation-adjusted annually)
  • Delaware: $50 or 10% of monthly rent
  • Wisconsin: $20
  • Virginia: $50
  • Washington, Maine, Minnesota, Colorado: Limited to actual screening cost.
  • Vermont, Massachusetts: No application fees to be charged.

As these rules change with each state, it’s best to consult your local municipality to determine the right fee caps for your property.

Portable Tenant Screening Reports (PTSRs)

PTSRs are among the most significant changes to the credit screening report landscape in 2026. This means tenants can pay for a single comprehensive credit report and then reuse it for multiple applications within a set timeframe (usually 30 days).

However, PTSRs are only limited to a few states at the moment. For instance, in Colorado (HB25-1236), landlords must accept PTSRs provided by the applicant starting January 1, 2026. And for applicants with housing subsidies, these reports don’t require credit history or scores.

Apart from Colorado, few other states have enabled PTSRs. These include California, Illinois, Maryland, New York, Rhode Island, and Washington. However, it’s mandatory only in Colorado, Illinois, and Washington.

Using Prohibited Records is a No-Go

Using legally suppressed or stale data to deny tenancy can lead to litigation. In most states, the following are strictly off-limits:

  • Sealed Evictions: If a court has sealed an eviction record, you won’t be able to use it to deny housing. It could lead to heavy penalties.
  • Expunged Criminal Records: Once a criminal record is expunged, it doesn’t legally exist. As a result, you can’t deny tenancy to an applicant based on that record, else you’ll end up violating FCRA.

Additionally, the Consumer Financial Protection Bureau is scrutinizing algorithmic tenant screening processes and their impact on underserved communities.

So, it’s important to ensure you don’t violate the FCRA rules by ensuring you’re not discriminating against a particular applicant.

Strategies for Evaluating Applicants with Poor or No Credit

While most applicants will have a credit history, some, like Gen Z renters or immigrants may have non-existent or thin files with little-to-no history.

However, you can’t turn them away on those grounds, as that could violate FCRA rules. In these cases, you should opt for alternative methods to understand their financial condition. Use these strategies:

Proof of Income

Since you can’t find their debt-to-income ratio from a credit report, it’s best to ask for proof of income in the form of tax returns, W-2 forms, or official offer letters. You can also request their bank statements to determine whether they’re financially solvent.

The key is to check whether their income is at least 3 times the monthly rent. If it’s under that, they could find it difficult to pay the rent.

AI-verified Pay Stubs

According to the above-mentioned NMHC study, 84.3% of respondents reported seeing false income/employment documentation, including pay stubs.These documents are easy to fabricate, but difficult for landlords to identify.

That’s where AI steps in.

AI can help you identify pixel inconsistencies and read metadata to help you understand if the document was edited or created in a payroll system. It can also cross-reference pay stubs with bank statements and other documents to detect conflicting information. This helps you find fabricated payslips with fake or inflated income.

Ask for a Co-signer

If the applicant has a low credit score and a limited income, you can still consider them if they agree to provide a guarantor. This is typically a close person who agrees to pay the rent if the tenant defaults. You should screen the co-signer to determine if they have a good credit score and income.

DIY Landlords vs. Property Managers: Tailoring Your Approach

While the tenant screening process is a necessity, your requirements should define your approach.

DIY Landlord

If you’re a landlord who’s managing a handful of properties by yourself, your focus should be on cost-efficiency, mitigating individual risk, and staying compliant without a legal team. Since you have only a few properties, your costs need to be low enough to improve your return on investment (ROI). This means the screening tool should be affordable.

Likewise, tenant screening should help reduce your financial risk of rental default. Finally, the tool should let you manage properties while abiding by all legal requirements. So, it should have built-in legal controls to help you comply with regulations.

Property Managers

As a property manager, you likely handle a large volume of properties. At this scale, you need to focus on bulk processing and API integrations to handle tenant credit reports.

Unified dashboards can help you easily track multiple properties. At the same time, you have to create strict standardized criteria across multiple owner portfolios to simplify property management.

Choosing the right tenant management software is crucial here. The best ones in the market scale from free tiers (perfect for DIY landlords) to advanced tiers (best for property managers). This way, they help both landlords and property managers vet and manage tenants throughout their lifecycle.

Red Flags to Watch for in a Tenant Credit Report

Once you’ve got a tenant credit report, you need to keep an eye out for potential red flags that could increase the risk of leasing out your property to the tenant.

Some clear signs include:

  • Significant employment gap, which could indicate inconsistent income.
  • Frequent address changes, meaning they lack long-term reliability.
  • A high debt-to-income ratio suggests they might not have enough money to pay monthly rent.
  • Unpaid utility bills, indicating a failure to maintain essential services.
  • Excessive hard inquiries suggest the applicant may be desperate for cash or financially unstable.
  • Low score trends. If the credit score is dropping slowly, it indicates poor credit management.
  • Late fees in recent history indicate if the tenant has a poor track record of on-time rental payments.

Protect Your Investment with the Right Tools

To protect your property investment, it’s important to learn how to run a credit check on a potential tenant. With screening, you gain a clear picture of whether the tenant can pay your monthly rent on time. It helps secure your property and ROI.

But as a landlord or property manager, you need the right tool to streamline the screening process. That’s where TenantCloud comes in. Along with a host of property management solutions, it offers an integrated tenant screening feature, where the tenant pays the fees, and you get a comprehensive report with accurate criminal, eviction, and credit data.

Plus, there's a 14-day free trial to get started.