If you aren't a big lender, you need to protect yourself because FICO scores may not be designed for your particular needs.
FICO is a scoring system designed to predict the future payment of bills. Most of the data in the FICO is derived from big lenders such as banks or credit cards. If you aren't a big lender, you need to protect yourself because the score may not be designed for your particular needs. One critical aspect of this problem is the listing of previous addresses on a Credit report.
FICO pays no attention to this listing. Probably, FICO's clients don't concern themselves with it either. You need to determine if this listing has value for you.
People will continue to pay a credit card or car loan after they move, but will they continue to pay you? Credit cards are a useful asset and people generally consider their car too important to lose. Is the credit you grant equally important?
If what you offer the public is easy to replace the answer is often a bad debt. The FICO score may have been higher than your minimum but you just don't matter enough. There are plenty of other apartment buildings, health clubs, child care centers and the like. It is not uncommon for some people who know they have bad credit to provide some false or misleading information on the Application. That should not be a surprise to you but it is easy to control by checking. Just take a look at the previous address list.
Has the applicant stayed in one place for what you consider a reasonable length of time or have they moved frequently? If the past reflects a history of frequent movement you should expect the same in the near future. What happens when your customers move? For many of you, nothing good can be expected.
You may also find overlapping addresses during the same time period. This can be caused by a credit profile that has been linked to a different person, combining data and completely destroying the relevance of the FICO score. It can also be due to movement by the applicant between two residences. How many people pay you if they move in with a relative?
FICO scores are designed to handle the prediction needs of their major customers. There is absolutely nothing wrong with that. If, however, you are not a major FICO customer, you have to do a bit more checking. The address list is available on all credit reports and costs nothing. It provides a great deal of valuable information for businesses that are affected by a moving customer. It takes about 5 seconds to read the list and figure it out.
Checking former addresses is a can't lose formula to decrease your bad debt for free.