You have created your rental criteria, advertised, and showed the property. Now you have received a completed application. If the application was done through a tenant screening service, they will provide you with a tenant screening report. If you haven’t gone through a screening service, this is where you will submit the application to one of those services, or input the information directly.
The tenant screening report is going to provide you with information that will help you accept or reject your applicants. In this installment of Landlording A-Z, we will discuss what you’re going to see in screening reports, references, types of documentation, and co-signers. Below is a brief rundown. See the complete episode for more information.
Reports
Here we will break down the information you should expect to receive in a tenant screening report through a tenant screening service.
Credit and Financial Report
This includes thorough credit information such as summary of debt and detailed payment history, including on-time or missed payments. Also will receive a credit score, or depending on the service, might be a similar “resident score”. TurboTenant includes their Income Insights report which makes a determination as to whether they believe the stated income is likely accurate or not.
Consider income vs monthly debt burden as discussed in the previous video. Also, look at the overall picture to see if the applicant has a poor credit history, missed payments, outstanding medical payments, or student loan debt. All these may negatively impact their credit score but may not necessarily be the best indication of their current status. Evaluate all this information in light of your criteria. What minimum credit score and income-to-rent ratio did you set? Does the applicant meet your criteria?
Criminal Background Check
You might not receive this if you are in a jurisdiction that does not allow landlords to consider this information when screening a tenant. If you are, this will usually include a 50-state background data search from public registries, FBI most wanted list, terrorist watch list, and sex offenders list.
Where legal to do so, check criminal background. Look for context. For example, how recent was the crime? What was the severity? Was it a minor lapse in judgment when they were younger, or something more serious? Again, having your rental criteria set before checking criminal history makes it easier when reviewing this information.
Identity Check, Employment, and Address History
Ensure the person you think you’re renting to is actually the one you’re screening. Get copies of their official government IDs for verification. Some screening services allow you to request documentation and the applicant can directly upload files and photos such as ID, paystubs, W2s, etc.
Most of the screening services verify the applicant’s social security number, employment history, and past addresses for you. Others, such as ApplyConnect, will also provide past names and aliases.
Evictions and Judgements
Most deliver some form of eviction records from all states as well as any prior court judgments from public records.
Evaluate if they have had any prior evictions or missed rent payments. This may be an indication of how they see the importance of rent responsibilities and whether they make it a habit to pay rent before spending on other less essential items.
Also Read: The Best Tenant Screening Service for Small Landlords
References
It’s important to check both landlord and employment references to get insightful information about your potential tenant before signing paperwork.
Talking to references is a great way to learn more about your candidate. References can help you evaluate their character, assess their interpersonal skills, check their financial fitness, and determine their ability to pay. Some tenant screening products like Avail can also email references for you.
You will want to ask landlord references about:
- Payments: Did they pay rent, utilities, and other fees on time? Were there any missed payments?
- Upholding agreements: Did they fulfill the terms agreed upon in the lease? Was proper notice given when they decided to move out?
- Interpersonal skills and/or conflicts
- Would the prior landlord rent to them again?
You will want to ask employment references about:
- Salary
- Verify employment terms: full-time/part-time/contract?
- Reliability
Also Read: Choosing the Best Questions to Ask Rental References
In the “Choosing the Best Questions to Ask Rental References” article, we also talk about how to screen tenants where traditional references are not available. For example, if there are problems verifying income (non-W2 income), or if there is a lack of credit, rental, or employment history. We also talk about other issues such as applicant consent to contact references, employers, how to spot fake references, and researching their online presence.
Documentation
Getting documentation to verify the applicant’s identity is an important part of the screening process. This can be done through government ID. You should also collect pay stubs, bank statements, or tax forms to verify their employment, salary, and ability to pay. You can upload all of this through the tenant screening software.
Screening Co-signers and Guarantors
A lot of times, you’ll have an applicant who might not be able to qualify on their own. In this case, they’ll have a co-signer or guarantor — someone else who can vouch for them. The best practice is to treat the co-signer or guarantor as if they are an applicant themself. Have them fill out an application, get the tenant screening report, and check references where appropriate.
There are also companies, such as TheGuarantors, that act as the guarantor. The applicant pays an insurance fee to TheGuarantors, and if the applicant can’t pay the rent, TheGuarantors do. There are also different products that offer rent assurance or rent guarantee.
Also Read: Rent Guarantee Insurance: New Options for Small Landlords
Takeaway
When it comes to tenant screening, we recommend using tenant screening software in conjunction with your criteria checklist to help you determine who to accept or reject. Additionally, having your criteria checklist ready already thought through beforehand will make the process easier and smoother.
Landlording A-Z Series:
Our Landlording A-Z series will walk you through each of the stages, tasks, and issues involved in rental real estate investing. In our next installment, we’ll discuss the process of accepting or rejecting tenants.
