- Hey guys what's going on, this is Seth
from REtipster Blog, and I wanna show you about
a really cool tool that can make it really easy
and even free for you to pull credit reports,
whether it's for a tenant who's gonna live
in your rental property or a potential borrower
who is going to be buying a property from you
with owner financing,
so if you're going to finance the sale for this borrower.
And first time I actually started doing seller financing
with the properties I was selling,
believe it or not I was actually told that
it's not worth your while and a waste of time
to pull credit reports.
Because when you're selling properties the way that I do
where I buy 'em for you know 10% of market value
and sell 'em for 50 to 70% of market value,
it's really easy to recoup all your investment
so that you know say if the person pays for a few months
and then defaults,
you can just repossess the property and resell again
and you pretty much already made all your money back.
So from that standpoint it kinda made sense,
but at the same time,
I have to tell you when you don't pull credit reports
on people, you best be prepared for them to stop paying you.
And I would say like a substantial percentage of the time
these borrowers will stop paying you
if you do no credit checks and don't scrutinize
that at all.
That's just something you have to be prepared for,
and I will tell you,
it is a pain, like it's a major pain
when you have to you know harass the borrower
to make the payments they said they were gonna make,
especially if they like disappear off the face
of the Earth and they just don't respond
to anything you send them.
It's a hassle.
Even in the states where the foreclosure or repossession
process is fairly easy,
even then it's something that I would rather not deal with.
So I can say if you ever wanna investigate
this kinda thing before
you get into this kind of relationship with a borrower,
it never hurts to pull a credit report,
and luckily it's pretty easy to do it
and it doesn't cost you anything.
You can do it with this website here called Cozy.
And Cozy is actually an awesome cloud-based
software that's intended for rental property owners
and landlords who want to self-manage their own rentals.
So that's kind of the idea behind it.
And as such all the language on the website
is geared towards you know tenants and landlords,
and that's kind of how they address their audience.
However you can still use the software
to pull credit reports when you're doing seller financing.
If you click the affiliate link beneath this video
and then follow along with me in the next few minutes,
I'm gonna show you exactly how you can do it,
and I think you'll see what I mean.
It's pretty stunning how easy this is.
And just for good measure if you've never been
through a credit report before,
if you don't really understand what you're looking at,
I'm gonna go through that as well
just to help you understand what all of these
facts and figures and numbers mean
and what kinds of things you should be paying attention to
as you go through this information.
So follow along and I will show you how it works.
Okay so if you click that affiliate link
I mentioned beneath this video,
you'll be taken to a page that looks something like this
on the Cozy website,
and in order to get started pulling a credit report
all you have to do is scroll down a little bit here
and then click on Screen Tenants Now.
And when you get started ordering a credit report,
there is a few different things you can do here.
First of all if you wanted to,
you can just get the credit report and that's just
gonna show you their credit score,
their credit history, and what their current
financial picture looks like with regard to
the debts that they have outstanding
and that they're paying on.
You also have the option say if you're not interested
in the credit what you could just get
a background check to see if this person has any
issues that you would wanna know about.
However it's a pretty good value if you wanted to get both.
It doesn't cost that much more than just getting
one of these.
So that's what I'm gonna do right here is just click this,
and that'll kinda inform me not only what this person's
financial picture looks like but also if there's any
big red flags that come up in their background check,
I'll know about that as well.
And as for the person we're gonna pull this on,
in order to show you what this looks like
from both your perspective and the tenant
or borrower's perspective,
I'm actually gonna pull this on myself
so I can kinda show you what it looks like to both people.
So I'm just gonna go ahead and put my information in here,
and the nice thing is,
this is literally all you need from your end,
is just the person's first and last name
and their email address.
Cozy kinda handles the rest,
which I'll show you in just a minute.
Go ahead and put that information in here.
And then when we scroll down here,
if you don't already have an account
you can go ahead and create one right here.
Personally I already have an account,
so I'm gonna go ahead and just sign in and do it that way.
Go ahead and check this and send the request.
Okay so now that email has been sent,
and it's just a matter of me going and checking my email,
and let's go ahead and do that.
Okay so the applicant is going to receive an email
that looks like this.
As you can see it's pretty straightforward,
pretty easy to understand,
just says who is requesting the background check
and credit report on them.
You will notice that it uses the words rental application
and landlords, so if you're not actually using this
for the purpose of doing a rental application,
say if you're doing this for like a seller finance deal
or any other reason for pulling a credit report,
you would just wanna sorta explain to the person
ahead of time what this is all about,
you know why they're getting this.
But as long as that person's okay with it,
they would just have to go ahead and click on Get Started.
Then the applicant is going to see a page
that looks like this,
and as you can see it's very straightforward,
there's no mystery about what's going on.
They can scroll down to enter in their payment information
and then just complete all this personal information
and then once that's completed they would just
go ahead and check this stuff and go ahead
and answer these security questions.
They're just gonna have to answer a handful
of security questions just to verify our identity,
and then once the applicant has answered these questions
to the best of their ability,
they're gonna click Next Purchase and pay for these reports.
Okay so now we're brought to this page.
It outlines what reports are being pulled
and who they're gonna be shared with.
And remember this is the view that the applicant is seeing,
so they are the ones paying for these reports,
not the person who is requesting it.
So that's just an important thing to keep in mind.
It's actually free for the person who is requesting it,
AKA you.
And once we've got all that information filled in
we'll go ahead and click Purchase and Share.
Okay so immediately after the applicant pays
for that credit report it's gonna take them to a page
where they can see their own credit report.
And usually the background check,
if that's been ordered too,
it might say pending for a few minutes
until that information gets pulled in.
And at this point I'm gonna jump over
to a couple of examples of credit reports
and background checks that Cozy will generate
just so you can kinda see what a typical report
might look like.
This right here is what the credit reports look like,
and as we can see from this example,
the score is 744.
That's pretty decent.
I can't really tell you what metrics you need to use
as far as when you should say yes or not to an applicant,
but I can tell you from my experience in the banking world
where we would lend you know millions of dollars
to people for commercial loans,
the way we used to look at it was for the most part,
if a credit score was ever 700 and above,
it was pretty much a shoo-in.
There might be some tiny little issues
in the credit report worth investigating,
but for the most part,
if somebody's score is you know 700 or north of that,
they're probably a pretty safe bet.
I think on maybe three or four occasions
I saw credit scores that were over 800,
which is pretty darn uncommon from what I've seen.
Once the scores dip down to like 650 to 700,
then there may be a few questions you might wanna ask.
And once it goes to the range of like 600 to 650,
then there's usually at least a reason or two
why it's that low.
And the person hasn't necessarily done everything perfectly.
And once it dips below 600,
that was a pretty major issue in terms of
how we looked at it as commercial lenders.
And it would be pretty hard to approve somebody
who was that low.
Again I'm not saying that you need to look at it that way,
but just to give you a frame of reference,
that was how we looked at it.
So really when you see that score,
that's helpful to know but that's not everything.
In order to really understand what's going on,
you have to scroll down and dig into the details
of what this person's financial picture looks like
from a debt standpoint.
What I really like about these credit reports
pulled through Cozy and Experian is that they're actually
very very easy to use.
A lot of the credit reports I used to look at
in the banking world were ridiculously confusing,
and it took me a long time to really understand
what I was looking at.
But these credit reports do a pretty good job
of showing you a visual representation of what's going on.
So if we go ahead and scroll down,
it comes down here to total monthly payments.
It gives you a nice little colored grid
illustrating what types of debts
they're currently paying on.
So it looks like this person has
more than half of their debt is related to
real estate loans, that kinda thing,
and then they've got some kind of a lease,
line of credit, auto loan, secured loan,
revolving charge account, and credit card.
So they've got a pretty diverse array
of different debts that they're currently paying on,
and their total monthly payments are $5,035.
So basically what this is telling us is that
this particular applicant better have
a pretty healthy income if they're gonna be able to
afford to make all of these monthly debt service
payments and pay for their own personal living expenses
and make the payments that they're gonna have to make
to us each month.
So that's just something to keep in mind.
When we scroll down further,
this also tells us what their total current balance is
on all their debts.
So they're owing about this much.
If they were to pay everything off today,
that's how much they'd have to come up with.
It also breaks down what portion of those debts
are baked into lines of credit and auto loans
and credit cards and that kinda thing.
When we scroll down further this is telling us
about any accounts that have ever been late
and how long it's been since they've been late
and any outstanding collections they have
or any public records.
And this is looking pretty good for this person.
They don't have any of that stuff.
I know something that I did used to see quite a lot
in the banking world,
for whatever reason people would get like these
medical collections where they would owe like 50 bucks
for something and it was basically a bill
that the doctor's office never really gave to them,
but it was still owing.
So this person didn't even realize they had this
collection out for 'em,
and as a result it really kinda hurt their credit score
and all they had to do is just pay it off
to get it resolved.
So it is possible that you may come across
collections from time to time that are pretty insignificant,
but if you're seeing collections that are like
thousands of dollars,
then that's a pretty big red flag and you'll probably
know this already just based on their credit score.
Because this number up here is probably gonna be
a lot lower if they have a lotta collections
or accounts late or public records
or anything like that.
When we keep scrolling down,
this tells us the account history,
and I think what this is typically doing is going back
about seven years to tell you all of the accounts
that are currently open and ones that have been paid off
and closed as well.
The way this works on the actual reports you'll get
is that you can click these little down arrows,
and it will expand to show you all of this information
for each of the accounts listed.
So for this one for example,
Department of Education, that's most likely
a student loan that this person has,
and it's got a current balance of 2,075 bucks,
original amount was 4,500 bucks,
and their payment is 45 bucks.
And all of these green circles with a c in it
are telling you that they have been current
on all of those payments.
So that they really have no history of being late
on this particular loan.
If you were to expand each of these,
you would probably see the same thing
for all the other accounts that they are currently paying on
or that they have paid off and closed.
If we go ahead and scroll down here,
this is also telling us some of the other inquiries
that have been made into this person's credit.
And basically what this means is that at some point,
this applicant most likely applied for a loan
or a credit card or something with these other
lending institutions, and at that point,
they pulled a credit report on them too.
This is also going to list some of their previous addresses,
and may or may not be helpful to you,
but it's almost always gonna be included there.
And then for employment,
if the person's currently employed,
you should see that information here.
And this can also be helpful when it comes to
verifying a person's income.
Because keep in mind,
this credit report is not telling you how much money
a person makes.
It's just telling you what their current
and previous debts have been and how effectively
they've been paying those on a historical basis.
So this really isn't even half the picture
of their total debt-to-income and what that looks like.
If you wanna understand what their income is,
one thing you could do is get their past couple
of pay stubs that they've received from their employer,
and that can just be used to verify
what their approximate monthly income is.
You could also get their most recent W-2,
and that's going to verify what their annual income was
in the most recent tax year.
However that doesn't necessarily guarantee
that they are currently employed.
It just shows what their historical income has been.
So it's usually a pretty good indication,
but it's not a guarantee that they're currently employed.
You could also get their most recent tax return,
which would detail all of their taxable income
and exactly what that would look like
for the most recent year.
So those are just a few of the things you can do
to verify what the person's income looks like.
And the reason that's important is because you know,
to somebody who is only making 5,000 bucks a month,
this is a ridiculously high amount of debt to be paying on.
But for somebody who is making 20,000 bucks a month,
this is not bad at all.
So that's why it's important to understand how much money
they're making and then kinda factor that
into this whole equation of how much debt they've got.
Then when we scroll down here to the bottom,
it's also going to let you know of any particular
factors that may be hurting their credit score.
So these reasons here,
the date that the oldest account was opened is too recent,
lack of sufficient relevant real estate account information,
the total of all balances on accounts is too high,
or balances on bankcard or revolving accounts too high
compared to credit limits.
So a lot of times these things can be a little petty
and don't necessarily mean anything bad,
but it's important to see this because that could be part
of the reason why this person's credit report
isn't 800.
And I will say,
if you ever do come across payments that are late
or historical payments that have been late
or collection accounts or anything like that,
it doesn't necessarily mean you need to
automatically turn them down.
It could, but it could also just mean,
you need to have a conversation with that applicant
to understand okay why were these payments late,
why are you currently late on this,
are you gonna get this resolved,
is this something we can expect to see from you
if we take you on as a tenant or a borrower?
The credit report is going to equip you
with a lotta information to just help flesh out
the story and understand what is going on
and what kind of a person you're dealing with
in terms of financial responsibility.
So that's just a quick overview of the credit report.
In terms of the background check,
if you do pull a background check,
it's gonna look something like this example.
And hopefully on the background check you pull,
it's just gonna show a lot of green clears right here.
But if there are any issues,
they would show up something like this,
and you would have to then investigate
or ask questions of the applicant just to find out
what's going on here,
and that may or may not cause you to deny them.
It's really up to you,
but this will at least let you know if you're dealing
with anybody who's got any kind of a checkered past.
Doesn't necessarily mean you have to turn 'em down,
but again that's up to you to decide,
and this will kinda help you understand
who you're dealing with.
So again, that is Cozy,
and that is how you can pull a credit report
and background checks through this service.
Again this is kinda intended
for the landlord/tenant relationship,
but as you can see from the example we just walked through,
it's pretty easy to use this for pretty much
any purpose when you need to pull a credit report
or background check.
And all of that landlord/tenant terminology
doesn't necessarily get mentioned a lot
or mixed into the process.
So I think as long as you understand how to use this,
and you want to use this,
it's pretty easy to get this information
on your applicants and it doesn't really cost you anything.
So it's a pretty slick service,
definitely worth checking out.
Again I've got an affiliate link to Cozy
beneath this video.
If you end up clicking on that and ordering
your credit reports through that,
it will generate a very very small commission
for the REtipster Blog.
So if you choose to do that,
I appreciate your support so much.
And of course Cozy is not the only place
you can get this information.
I just think it happens to be one of the easiest
ways to get it.
So hopefully that makes sense.
Thanks again for watching,
and we'll talk to you later.