The difference in a renters credit score, and the one you get is this. Many background check companies, such as mcccgrp.com, use a true FICO score, developed by Fair Isaac Corporation (FICO). If you are gong to be a successful landlord, you need to understand the relationship between tenant performance and credit score.
It is a proprietary score, only issued by FICO. It relies on information from the credit reporting agencies, Experian, Transunion and Equifax. This is the official FICO score. It is the one lenders use. It costs money to get it, and it is probably the most expensive score. The FICO score ranges from 300 to 850.
NEVER, EVER, use the tenants own score to make a decision on whether or not to accept them. Use your own credit score source. It will be consistent, it will be fair across all renters, and it will not be a fake one.
When FICO creates a score, it is based on the inputs from the three different credit reporting agencies, Experian, Transunion and Equifax. Creditors send information to one or more of these three agencies on different timeframes. Ford Finance might send information to two of the three agencies on the 15th of the month. US Bank might send to only one agency on the 20th. Visa might send to two different agencies, to one on the 5th and to the other on the 25th. Bank of America might send daily updates.
Since creditors send their information to one or more of the three agencies on different schedules, on any given day the renters credit score could be slightly different. Each agency could have potentially different information that they gather up and send to FICO to calculate a score.
If it was possible for all of the credit reporting agencies to have the identical information, FICO would generate the identical score for Experian, Transunion and Equifax.
The scores many tenants have are ‘Plus’ or ‘Vantage’ scores. The three credit agencies have developed their scoring method. Experian has a PLUS score. Transunion has a Vantage score. Equifax has their score. They sell these scores to people who want to know what their credit score is. It is a different score than FICO, it is more of a FICO credit score predictor. The Credit reporting agencies have a vested interest in providing a score, not a ‘no score’ as FICO might have. They have their own criteria. Their scores could be higher, or lower.
So, when the tenants ‘buy’ a score from a different source than the score you ‘bought’ it will likely be different. They are two entirely different scores, calculated by different algorithms, by two entirely different companies, on two different dates.
You as a landlord care about credit score because of its ability to predict personal behaviors and its ability to predict future payments. It is a color blind indicator.
People with low or no credit scores are a higher risk to your building and to other tenants. Most landlords are running a business, not a homeless shelter. Lower credit scores mean less profitability. Drug dealers, pimps, prostitutes, money launderers and the like, deal with cash, and often have no credit score. They have friends that are like them, which is also a bad deal. Even their relatives that hang around them often have unsavory pasts.
Not every criminal has a criminal record. Criminals fool the legal system on a regular basis, but criminals have a hard time fooling the financial industry.
Have you ever wondered about this? Have you ever had a tenant argue that their score was different that the one you came up with?