If you are a rental property manager, owner, or investor, it’s a necessary responsibility to do a tenant screening before allowing potential renters access to your property. A tenant screening has many advantages if done correctly. However, if there is a careless tenant screening process in place, this can create a disadvantage.
Learning that there are disadvantages and advantages of tenant screening will help you understand how to make your tenant screening process better to maximize the benefits and minimize the weak points.
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The Advantages of Tenant Screening
There are four advantages to conducting a tenant screening following an economic and legal checklist. Conducting a screening of credit histories, the applicant’s ability to pay rent, rental documents, eviction records, and criminal background will contribute to these advantages.
- Maximize revenue or investments
- Avoid legal problems
- Protect your properties
- Keep other tenants safe
Credit History
Credit history is the first financial area to check for when conducting a tenant screening. First, you have to know if the applicant can make rent payments every month on time. If the applicant’s credit history shows that making payments regularly is not something they were able to do in the past, this rental arrangement may not work.
Here is what you should look for when checking an applicant’s credit history:
- High credit score
- Little to no late payments
- Little or no payment gaps
- Little to no debt
- No negative information like bankruptcies, car repossessions, accounts in collection, or credit card charge-offs
- A financial rental history that has no delinquent accounts
Income Level
Of course, knowing if the applicant has the means to pay the required amount of rent each month is an essential factor in tenant screening. In addition, verifying an income level or source of rent payment will protect you from revenue loss and possible eviction legal proceedings, which can be costly.
Rental References
This form of screening can involve prior landlords and personal references. Contacting more than one rental reference can screen for chronic misdeeds during each rental period. However, if only one rental reference is available because of an applicant’s long-lasting renting duration, this could indicate a reliable tenant.
Eviction History
Landlords can find eviction records in a separate rental history report through a tenant screening company. An eviction will stay on a rental history report for seven years.
Criminal background
Tenant screening sources allow checking for state and federal criminal history, but some sources also will enable you to include terrorist or sex offender searches. In addition, when an applicant gives you a social security number to facilitate screening, you can also check to make sure that social security number fraud is not being perpetrated.
Applicants may provide a fake social security number to avoid a negative tenant screening. In this case, tenant screening sources will ensure the name matches the social security number given and other vital identifying information.
The Disadvantage of Tenant Screening
The disadvantage of tenant screening, especially if done too hastily and carelessly, can eliminate the quality tenants you want to have at your property. Eliminating possible quality tenants can happen when you rely on a computer-generated recommendation derived from using algorithms. Unfortunately, these reports usually don’t include details on the negative information that the computer software has uncovered.
For example, the computer software would probably flag an applicant as a no-go if a potential tenant has a blemish on their record regarding an eviction, nonpayment of rent, and rental property damage. But, what if details that are missing from the report shed a different light on this information?
If a landlord sued a potential tenant over these issues, it might have turned out that the potential tenant was found legally correct in a final ruling. So, yes, the eviction, nonpayment of rent, and rental property damage are still there for the computer software to report, but maybe the details about how the legalities absolved the potential tenant of these issues aren’t.
When relying on computer-generated information, misunderstandings about credit histories, income levels, rental references, eviction histories, and criminal background checks can always happen. Therefore, it might be wise to make additional efforts to ensure you are not passing up a quality tenant.
- Conduct a tenant screening going back 1 to 3 years. Any more than that, you’re sure to find something negative.
- Call the applicant’s employer for employment verification.
- Call more than one prior landlord or rental reference for information on lease term fulfillment, possible evictions, late rent payments, and property conditions.
- Call personal references
Knowing a tenant screening is worth it and how it can be even more advantageous if done thoroughly will make your rental business thrive in the long run.