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- 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.