What To Look for in a Tenant Screening Report

If you follow our blogs (Problem Rental Solutions and Real Estate Asset Links) you have read how important we believe tenant screening is. So this article will tell you what you need to know about reading the Tenant Screening Report. You cannot request a credit report directly from a Credit Bureau.  You must use a portal to request a screening that the tenant approves and fills out before that report before it is sent to you.  Tenant Screening is built into the Smart Property Systems platform for your convenience. You order the report which generates an email to the prospective tenant and they log in and fill out the data. Once you get that report back, it is important to be able to understand what you are seeing.

First check the tenant’s credit Score. Some reports give a FICO score and some give a Vantage score.  The Fico score is that score given by the credit bureau which provided the report.  A Vantage score is a combination of all three FICO scores from the three main credit bureaus that serve the US.  Scores range from 300 (poor) to 850 (best).  Generally any score above 650 shows reasonable risk and indicates that the tenant will make regular rent payments. Scores below that level will put you on notice that you need to get more security deposit and or first and last month’s rent.

The report should be checked for a history of bankruptcy.  The report will also show payment history for any credit accounts where regular payments are expected.  Check for payments to credit cards or revolving credit accounts with merchants. If they are showing green or on time that shows that the applciant pays their obligations regularly. That will give you an idea of how this prospective tenant views payment obligations such as rent.

Personal injury claims and civil lawsuits are reported on some types of reports.  If the prospective tenant is local to your area, you can also check that history at your county courthouse. While you are at it, do verify employment and the amount of pay claimed on the application. If there is a previous landlord, call and check the tenant history.  Ask specific questions to be sure that you are not calling a friend of the prospective tenant and not the real landlord.  Previous landlords can be your best source of information when deciding to turn over your valuable property.

Eviction data is currently not very reliable. Even if the report says that no evictions have happened, it may not reflect the unknown data.  If the tenant was served with papers and moved before the eviction date, this information is not reported by the courts because the case was never heard.  Many jurisdictions do not report eviction data to the general public.  Credit and data bureaus are working hard to change this data void but it may take years to get a reliable eviction report.  You can check for evictions in the county in which you own property however in court records.

If you have ordered a report that gives you criminal history, be sure that it shows Felony, Sexual Predator and Homeland Security scans. If not, change your source of reporting. This information has become especially important in the past several years. I also recommend that the report inherently verifies Identity and Social Security number. (Yes, there have been reports of people using someone else’s social security number because they have bad credit.)

Your Application Fee should help you cover the cost of the tenant screening.  Typical Application Fees normally range from $30 to $70 and are payable when the application is submitted. In California there is a new law requiring you to show the tenant your charge for tenant screening.  (read this law).  This fee is to cover the cost of your time and screening and risk management for your properties.

If you decide not to rent to a person because of low credit scores or information you have received when doing your due diligence, you are required by law to provide that person with the name and address of the credit bureau or agency that reported  the negative information and or the reason for denial.  You must also inform this person that he has a right to obtain a copy of the credit report from that agency by contacting that agency within 60 days of being told that the application was rejected based on the individual’s credit report. (see article) Those forms are built into the library at Smart Property Systems and can be embedded with esign for your protection.

Tenant Screening well done can help you create a quality tenant mix for your properties.  You will have tenants who pay rent on time, care for the property and get along with neighbors. It is a necessary part of the tenanting process.

By: Timmi Ryerson, CEO
Smart Property Systems
smartpropertysystems.com

Tenant Screening May Be Your Most Important Task

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Renting your properties can involve a variety of different tasks in order to make your investment pay off. It is most likely that none of those tasks is more important than simply taking the time to do screening of potential tenants.

Not performing such duties means that the landlord runs the risk of renting his valuable investment property to someone who will not pay the rent or care for the property. Tenant mix is a daunting task with so many people looking for good housing. Horror stories from landlords who found out they were renting their unit to either a terrorist or sex offender, or someone running a meth lab with additional criminal history, shine a blinding light on the need for tenant screening.

How it is Done

Tenant Screening is done through a credit bureau. The credit bureau aggregates credit and criminal history stored as events for every social security numbered person in the United States. A good tenant screening report will give you a fico credit score, credit history, a recommendation regarding renting to this prospect, felony criminal report by state, screen for sexual predator history, homeland security registry, verify identity and social security number.

Be sure to get an application from and do a tenant screening report for every person who will occupy your property over the age of 18. Also have them list any children who are expected to inhabit the unit. That way you will know who should be present during the lease period and who should not. Guests usually have a one or two week stay privilege. Enforce that term to prevent having more people living in a unit than the unit can support.

In the Past

15 years ago,  tenant screening was a hit-or-miss process, since the average landlord didn’t have access to credit and criminal histories, or obtaining it was prohibitively time-consuming and expensive. With the advent of the internet, many of those barriers fell, as companies like Smart Property Systems came online to offer built in tenant screening at a reasonable fee for you to access.  https://smartpropertysystems.com

More to this Job than Screening Reports

After getting the screening report, there other are ways to to get an idea of whether your candidate is qualified tenant material for your valuable property. The adage about “first impressions making a huge impact” can be your best ally. Pay attention to appearance. If the prospective tenant arrives looking unkempt or they pay little attention to grooming when you first meet them, the possibility of having someone who will not care for your property rises exponentially. If they casually use foul language or act rudely or appear arrogant during the initial meeting, it might a strong sign that they will have issues with neighbors, and you as a landlord, once they have moved in. I always made a point of walking a prospective tenant to their car to see what condition it was in. If is was full of junk and old food etc. it was never a good sign.

Asking the potential renter to list previous places they have lived as well as current and previous employers, all with contact numbers is highly recommended. Then call those references. Ask them to identify the address and specific information that only they could know to be sure that you have the person you intended to reach. When a tenant knows his past is sketchy he may give you false references, friends of his who will espouse his virtues. This kind of investigation, even though it takes a few minutes, can offer a more objective window into the candidate’s character. You may find out that the person fell behind on his rent and was forced to leave a previous residence. One rule of thumb in tenant screening is that any previous evictions which are discovered in your due diligence search, will result in potential elimination of that prospective tenant as a candidate. If you are willing to take a risk, however, balance your chances of success by getting first and last month’s rent plus a good deposit. If the candidate does not have the funds enough to move in, then go to the next candidate.

As you do your due diligence, you might find out that a prospect has misrepresented their monthly income, hoping that you wouldn’t find out that they’ll have problems paying the full rent. Also, you can find out if their job is considered a steady one. If it’s one of the seasonal variety, you might run into problems during their slack periods. You will also be able to determine if they have a tendency to jump from job to job. Job jumpers may be more likely to be lease jumpers as well. Lease jumpers is a whole different topic which we will cover in a different blog article.

Being able to run a credit check on a candidate can give you clarity about their payment history for other than rent payment types. Credit history should be a main qualifier when you are deciding which candidate to accept.

Do You Allow Smoking?

Also, the issue of smoking can be addressed with a candidate, since more costs are usually incurred by the landlord during and after a tenant who is a smoker or allows smokers into the property, vacates the unit. It is very hard to get the smoke smell out of carpets and draperies, as well as off the walls. Make your smoking rules very clear and have terminology in your lease agreement regarding penalties for smoking by tenants and their guests inside the unit. If you have a no smoking environment be upfront about it when the person applies. It is hard not to allow a smoker housing as it is considered discriminatory. Make your rules plainly known before signing the lease to protect yourself against increased costs at turnover.

What About Pets?

Do you allow pets? This is one of the biggest issues for landlords and property managers today.

Pet owners should register their pets with you at the time of application for rent. You get to decide what breeds and species you will and will not allow. Pet owners are not always the best pet trainers. Some of the pitfalls of allowing pets are barking dogs, garbage dogs, pet owners not cleaning up when walking the dog, dogs who damage the property, dogs who attack non family members. There are cats who spray the walls in your unit, tear up the carpet with claws, damage the window coverings and howl at night. I will not cover birds, snakes, reptiles or aquariums in this blog. But know that each has associated hazards.

The current mainstream thought among landlords and property managers is that allowing pets is more than a pain for management. However, most are pet friendly due to pressure from renters and candidates to rent. Whereas you cannot screen for good pet ownership, you can provide strict guidelines for the privilege of keeping a pet. Be sure that they are clear, and then enforce them. Getting  a hefty pet fee (which is non refundable) and pet deposit (which is refundable) is another way to help control the situation created by pets in a unit. Remember that it will be you with the pooper scooper when your tenants deny responsibility for negligence.

The Decision

The screening process is usually understood by prospective tenants to be a guide by which they will be judged suitable or not for a particular property. It is important to remain business-like in your decision making process. You may even have a “reasons for rejection” list created to give to the prospective tenant before you screen their application details. By using the same process with each candidate, you can clearly show how you were able to come to your conclusion if you decide to reject the candidate(s). Remember that it is illegal to discriminate based on race or creed. It is also recommended that you never give the screening reports to your candidate. They are meant for you in confidence.  Most tenant screening reports are returned to you within minutes of the tenant’s submitting the online screening request.  You can usually have your decision made with in hours of accepting an application.  Make your decision and stick to it.

Tenant screening is a necessary part of risk management in the rental process. However, it serves as an invaluable litmus test for a landlord. In the long run, tenant screening will save you time and money and reduce your stress levels, as you build a quality tenant base for your valuable investment properties. Good tenants beget more good tenants through word of mouth.

Tenant Screening is a great ally for every real estate investor and property manager.

Qualities of a Good Tenant

What are the Qualities of a Good Tenant?girl with halo
They say that you can’t judge a book by its cover. Well, that may be a fine saying when it comes to literature, but when you’re trying to find the right tenant to fill a vacancy, there’s a bit more at stake. After all, unless you want to deal with property damage, late rent payments, and time-consuming eviction processes, you should be doing everything in your power to determine exactly who will—and who will not—end up being the kind of renter you’re looking for. But what is it exactly that defines a good tenant? We’ve narrowed it down to seven specific qualities that you should look for when trying to select the right person to entrust with your property.

1. Job Stability
While almost anyone can scrounge enough money together to pay rent every now and again, those who are able to consistently get the check into your hands before the due-date are generally those who have stable employment. At the same time, the ability to hold onto a job for an extended period demonstrates commitment, reliability, and maturity. Be wary of any prospective tenants who have worked multiple jobs within the last few years, as they could end up being unreliable when it comes to their own responsibilities as renters.

2. Cleanliness
No tenant stays forever, and once a tenant leaves, you’re going to want your property back in the same condition that it was when you first rented it out. Well, in order for that to happen, you’ll need to have tenants who take personal responsibility for the condition of the property while they call it home. Tenants who are themselves clean and demonstrate good personal hygiene are more likely to translate that trait into good housekeeping and property management skills.

3. Honesty/Integrity
Your relationship with you tenant is defined by a contract, but there’s no way that that contract will be able to determine responsibility for every unique situation. Likewise, you’ll often have to rely on the tenant themselves when gathering information regarding issues and problems. A trustworthy renter will make things much easier on you by being honest and living up to their part of the rental agreement without looking for loopholes.

4. Lawfulness
You may think that as long as you get your rent check on time, it’s not any of your business how law-abiding your tenants are. However, the reality is that in addition to posing a danger to property, neighbors, and even themselves, criminals are often much more likely to try to take advantage of you and avoid their own responsibilities as renters. Additionally, as the owner, you may be held legally liable for criminal activity that occurs on your property. Suffice it to say that tenants who engage in illegal activities will cause you nothing but stress and expense in the long run.

5. Thoroughness/Attention to Detail
A rental agreement is a legally-binding contract. As such, it’s not something that should be entered into lightly. Prospective tenants who make a point to read and understand the lease—even if they have to ask questions along the way—show their own respect for the agreement. And, because they are willing to take the time to figure out what exactly is expected of them as a renter, they’ll be less likely to renege on the agreement.

6. Friendlyness

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Human beings are social animals, which means that we tend to work best when we get along with each other. So, unless you’re renting out a piece of property that’s out in the middle of nowhere, you should consider just how friendly your potential renter is. When renters are unable to play nice with their neighbors, then invariably the end result is increased complaints, reduced renter satisfaction, and an all around cut in your profits. Try to make things easier on everyone involved, and find tenants who make good neighbors.

7. Low “Stress Quotient”
If you take the various traits displayed by your tenant and add them all together, you get something called the “stress quotient.” This is a general idea of the amount of stress that any one particular tenant might cause you. So, talk with the tenant, do background checks for criminal and credit history, ask for references from previous landlords, make note of the state of the car they drive, ask them directly about criminal activity and drug use, and yes, go ahead and judge that book by its cover (within the legal bounds of the Fair Housing Act, of course), because once the contract is signed, you’ll be stuck with each other for a while. If you can locate someone who demonstrates these seven traits, you’ll be much less likely to end up having to regret it.