Tenant screening is a vital responsibility for landlords. Screening is your only protection against destructive tenants, expensive eviction fees, and even legal liability.
Due to these risks, it’s important to screen tenants properly. However, there’s sometimes confusion among landlords about the best way to do this. Tools like property management software or an individualized tenant scoring system are excellent ways to guide your tenant screening process.
Here are five recommendations for how to screen tenants properly.
Run Credit Reports
Running a credit report involves much more than a single number score. When you run a credit report, make sure you look for all five components:
- Basic information (name and address)
- Fraud indicators (verifies that SSN and phone numbers match)
- Tradeline summary (a summary of active accounts)
- Inquiries (a list of who else has recently viewed the applicant’s credit file)
- Credit/resident score (a number representing overall creditworthiness)
Credit reports are especially useful when you consider scores and tradeline summaries in relation to income. For instance, if a tenant has sufficient income but multiple debt responsibilities, they may not be as prepared to handle rent.
Run Background Checks
Background checks are also an essential step to screening tenants properly. Background checks typically include criminal and eviction histories.
Criminal
Criminal histories can be tricky to find. For instance, if a renter lives in one county but committed a crime in another, you won’t find this information by simply searching the county associated with their address. Country records also typically have fees and are slow to obtain. However, local records do tend to be the most accurate.
If you’re looking for speed and cost-efficiency, you might be better served by national or state records. But be careful: While these records can be obtained faster and cheaper, they sometimes have inaccuracies or inconsistencies.
Most landlords can find out what they need to know with a national criminal record search paired with credit and income verification.
Eviction
Eviction reports can also be difficult to locate because they are typically only filed by the first and last names of the tenant. When searching eviction records, be extra careful that you’ve found the right person.
Background checks are important for verifying claims, protecting against legal liability, reducing tenant turnover, and assessing honesty and integrity. A sloppy attempt at this step could result in an expensive lawsuit or eviction fee.
Verify Employment and Income
To properly screen a tenant, you need proof that they are capable of paying rent. For this reason, you should always verify income or employment.
Start by asking applicants to self-report their available income on the rental application. Then, verify that information. This can be done by either requiring renters to attach a recent pay stub or following up with an employer if you ask applicants to list one.
Remember, tenants should have both sufficient and reliable income. Here’s a general rule to follow. If a tenant’s rent plus monthly debt exceeds 70% of their income, the tenant will likely struggle to afford to rent your property.
Use a Scoring System
A tenant scoring system is a weighted point system that assigns applicants a numerical score based on a variety of factors. Many tenant scoring templates are available online, but you can also create your own. You should customize the points and weights to suit your personal values for tenants.
For instance, say you’re looking for tenants with credit scores above 700 but do not want to rent to tenants who have had prior evictions. In that case, you could assign “credit score above 700” three points and “prior evictions” negative three points.
A scoring system is also a smart way to protect yourself from discrimination lawsuits. If you have a documented, objective method of scoring tenants, you can easily justify why you denied a tenant if questioned.
Ask Purposeful Questions on Your Rental Application
A final step to properly screening tenants is to ask purposeful questions on your rental application. Find out about any immediate dealbreakers for which you would deny a tenant—for instance, smoking or pet ownership.
The rental application is your chance to find out anything you didn’t in the rest of the screening process. However, be aware of the topics you should not ask about. These include the seven classes protected by the Federal Fair Housing Policy. Above all, remember to apply the same screening practices equally to all applicants.
Secure Success with Tenant Screening
If you’ve followed the above recommendations and properly evaluated credit reports, background checks, and rental applications, your screening process is in good shape. Also, take advantage of property management software, an excellent screening tool. With these practices and the help of software, great tenants are within your reach.