Let's suppose your phone rings one day.
You look down, but don't recognize the number.
You keep staring at your phone, and curiosity gets the best of you… so you pick it up.
It's a stranger on the other line.
They start proposing this idea about getting into a long-term business relationship with you. They promise they'll be agreeable and easy to work with. The only thing is… they need YOU to make a massive financial investment and put a huge pile of your own cash on the line for their benefit.
And you're not allowed to ask any questions... they just need you to say YES, right now.
Does this sound like a good deal to you?
Now, I'm not necessarily saying this person is a swindler.
For all you know, they may be great to work with…
…or they could also be a lying, psychotic, back-stabbing fraudster.
Whatever the situation is – if you decide to move forward, you'll be walking into the relationship BLIND unless you do some digging and get educated about who you're dealing with.
Doing Your Homework
If you're in the business of renting out real estate or selling your properties with seller financing, you already know – these kinds of prospects will come across your desk on a fairly regular basis.
A lot of people are going to want what you have to offer, and it's on YOU to either investigate their background, or take their word that they'll pay on time, every time.
Whenever you're considering a new business relationship with someone who “promises” to send you regular payments, it's never a bad idea to do some fact-checking and gather some data about the person(s) on the other side of the deal.
Better to be armed with some information than no information – right?
The good news is, it's really easy to get answers. And it doesn't have to cost you a dime.
In the next few minutes, I'll show you how you can run credit checks AND background checks on the potential tenants or borrowers you're working with (and if you stick with me, I'll show you how to read these reports too).
The platform we're going to use is called Cozy.
In case you're not familiar with Cozy – this is a online, cloud-based software, designed to assist “mom and pop” landlords in handling the essential, ongoing tasks of managing their rental properties.
I'm talking about things like…
- Listing properties For Rent
- Pulling credit reports and background checks
- Collecting monthly rent payments online
- Processing rental applications
- Determining the right amount to charge for rent
- Getting set up with Renters Insurance
Now, I've only used Cozy to pull credit reports and background checks, but I've talked with a lot of other landlords who use Cozy to fully manage their rental properties and I'm not exaggerating when I say this – EVERYONE has told me they love this software (which isn't something I can say about most online software and services out there).
How to Run a Credit Check for FREE
So let's dive into it.
If you need to pull a credit report or background check on a potential tenant or borrower, here's how you can do it:
- Go to this page, scroll down and click on Screen Tenants Now.
- Select which report(s) you want to generate.
- Type out the first name, last name and email address of the applicant.
- Enter your free account information (it takes less than 10 seconds).
- Click on Send Requests.
…and Cozy will handle the rest.
I'll show you exactly how it works in this video:
Note: Some of the links throughout this blog post are affiliate links that will generate a small commission for the REtipster Blog at no additional cost to you. If you feel Cozy will help achieve your goals and you decide to use these links, your support is very much appreciated!
Overall, there are a lot of reasons why I like Cozy:
- The website is beautifully designed and very easy to follow (for both parties). If you know how to use a computer and check your email, it's basically impossible to get lost or confused during the process.
- For the person requesting the credit report (i.e. – YOU), it doesn't cost anything.
- The reports are clean, concise and easy to read. You don't have to be a banker or finance professional to understand what you're looking at.
- If you want to use the service to handle other aspects of your rental property business (e.g. – property listings, finding tenants or payment collection), it can do a lot of other stuff too.
And when it comes to credit reports, there's another important thing to keep in mind.
When most conventional lenders and creditors “pull credit” on their applicant, it’s usually a one-sided transaction that has no involvement from the tenant or borrower. As a result, it lowers the applicant's credit score with every inquiry (this is why they call it a “hard inquiry”).
However, Cozy DOES involve the applicant in this process (as shown in the video above) and as such, the credit bureaus treat it as a “soft inquiry”, which doesn’t ding their credit with every inquiry. It’s treated the same as if the applicant pulled their own credit – which they don’t get penalized for.
Why Screening Matters
Back when I was a real estate novice, the idea of pulling a credit report seemed pretty confusing (and even intimidating) to me.
You see, I had no idea how to get my hands on someone's credit report, and even if I did – I wouldn't have known how to make any sense of it (I never would've admitted this openly at the time – because I didn't want to look or feel stupid).
For a lot of years, I used to sell properties with seller financing, and I didn't run ANY credit checks on the borrowers I was working with.
I know, it might sound crazy (and maybe it was a little), but I was able to justify this for a couple of reasons:
- I was buying properties for around 10% – 30% of market value, and selling them for 50% – 70% of market value… sometimes more. This gave me a BIG, built-in profit margin, and I was usually able to recoup my total investment into each property before my borrowers had a chance to default on their payments to me, so I was pretty well covered, no matter what happened.
- If a borrower ever stopped paying, I was able to repossess the property without much trouble (because I only work in states that made the process easy). As a result, this allowed me to sell the property to someone else, and start making money all over again (which could potentially make the deal even more lucrative in the long run).
In my situation, there were actually some valid arguments for foregoing the credit report – but even then, when you consider how easy this process is, how valuable the information is AND the fact that it doesn't even cost anything… why would you not do this??
I'll be the first to tell you – even if you're not losing money on the deal, it's still a big hassle when a borrower or tenant stops paying. Even with mechanisms in place to get the property “unstuck”, it still chews up a lot of time and energy to make it happen.
For a lot of reasons, it's smart to get educated about the people you're looking to work with – especially when a website like Cozy makes the process so painless.