Tenant Risk Score vs Credit Score and its Assessment: Everything About it:

  • By: Peter Parker
  • Time to read: 4 min.

Being a landlord is a challenging task. Screening and finalizing is one of the most difficult jobs of a landlord.

It is crucial to find responsible and reliable tenants who pay rent on time and take good care of the property. 

Tenant credit score and tenant risk score are two critical parameters to consider before finalizing the tenant. These scores will let you know about the prospective tenant’s financial health and rental history.

You can make an informed choice and choose a reliable tenant by using these two parameters for tenant screening. 

Most landlords often need clarification on the two terms tenant risk score and tenant credit score. Though both the scores display significant information about the tenant, the tent risk score and tenant credit score are two different factors. 

Let us understand each of the scores first and know the differences between the two. 

What is the tenancy risk score?

The tenancy risk score is a combination of many factors that will let you know the risk carried by a prospective tenant.

Many factors are included while calculating the tenancy risk score. Some of them are

  • The credit score of the applicant from the credit bureau data
  • Defaults 
  • Bankruptcy data 
  • Court judgements 
  • Serious infringements
  • Public notices against  the prospective tenant
  • Tenant scores awarded by previous landlords and property managers
  • Orders from the tenancy tribunal
  • Tenancy breach notices against the prospective tenant
  • The general behavior of the tenant during the tenancy
  • Previous rental history and evictions
  • Criminal history

Different values are assigned to all of these factors and a single score is generated to rate the applicant.

The tenancy score is generated on a scale of 200 to 800. The scale varies depending on the company, you are working with for generating the tenant risk score. 

The higher the tenancy risk score, the lower the potential risk associated with the applicant.

For example, an applicant with a tenancy risk score of above 500 is always better than an applicant with a risk score of less than 500. 

What is a credit score? 

A credit score rates an individual’s ability to repay a debt. It helps the lenders to identify the potential risk of default by a prospective borrower. 

There are hundreds of models to calculate credit scores. However, the significant factors that are considered while determining the credit score are

  • Payment history of the person – The payment history of a person is determined based on the prompt repayment of loans. Any delay in repayment will impact the credit score negatively. 
  • The amount of money the person owes – The total amount borrowed by the individual from various sources such as banks and other financial institutions, money lenders, etc. 
  • The types of credit – what are the different types of credit used by the borrower? For example, home mortgages, vehicle mortgages, education loans, etc. 
  • Length of credit history – The time duration of the borrower’s credit history. 
  • New credit applications – Any new or pending applications for credit by the borrower.

A single credit score is assigned to an individual after considering the above parameters. The higher the credit score, the lesser the potential risks associated with lending to the individual. 

Credit scores are calculated on a scale of 300 to 850. A credit score above 670 is considered acceptable by most lenders, while a score above 800 is considered excellent. 

Tenant Risk Score Vs credit score 

Both the credit score and the tenancy risk score predict the potential risk of letting the property to a prospective tenant. However, there are differences in the parameters considered for calculating the scores. 

Tenant risk ScoreCredit Score
The tenant risk score portrays the risk associated with renting to a prospective applicant.Credit score portrays the likelihood of a borrower repaying the debt. 
Tenant risk score considers various factors such as credit history, rental history, and criminal history.Credit score only considers the credit history. 
Accurate score for determining safe tenants as it includes evictions, late rent payments, tenancy breach notices, and other significant data. Only provides data about the financial health of the applicant. 
The tenant risk score is apt for the rental industry as it is calculated using different parameters such as rental history, criminal background, and credit history. There are several models to calculate the credit score based on the industry. For example, the credit score of an auto insurance model is different from the credit score of a financial institution. It is difficult for landlords to identify the right credit score suitable for them. 
Tenant risk score can predict evictions and late rent payments. A typical credit score cannot predict evictions with precision. 
A tenant risk score of 500 and above is considered good A credit score of above 570 is desirable 
The tenant risk score includes the credit score.The credit score does not include the tenant risk score.

Using the tenant risk score instead of only the credit score will allow you to get better insights into the rental history of the applicant.

For example, the tenancy risk score can identify the likelihood of evictions and skipped rental payments more accurately when compared to the credit score. 

You can easily compare the applicants and shortlist the right tenant for the property by comparing their individual tenant risk scores. It is an accurate parameter that portrays the risk associated with renting to a particular applicant. 

Choosing the right model to generate the tenancy risk score is very important to get accurate predictions and safeguard your rental income.

Many reputed companies provide tenant risk scores or resident risk scores. Some of them are RentPrep, TransUnion ResidentScore, and SafeRent.

You can generate the tenant risk scores of your applicants by subscribing to the services of any of these providers. 

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