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