Are You OVER-Screening Tenants? How Background Checks & Credit Scores Can Fail

by |

We’re known for making a big deal about tenant screening — we believe (and have years of experience to back it up) that 90 percent of tenant evictions can be traced back to poor tenant screening. So, we thoroughly screen every single tenant with the same process. Before you form any thoughts about us operating in an easy market, note that we manage properties in the city of Detroit, so you know that many of the people we’re screening are not exactly exemplary when it comes to their credentials.

But even we believe that it’s possible to be too strict when it comes to tenant screening. We won’t take a tenant who straight up lies on their application, period. But there is at least a tiny bit of wiggle room on any other aspect of their application, and I’ll explain why, but first, I have to explain just a little bit of background theory. Bear with me; it’ll be worth it.

The Two Dimensions of Tenant Qualifications

Tenant screening consists of two essential aspects of each tenant: their financials and their behavior. If a tenant represents too much of a risk because they might not pay rent regularly, they’re not worth signing — but even a tenant who pays rent like clockwork can still be too costly if they’re prone to behavior that damages the property, be it neglect or active abuse. A tenant has to have both to get signed by our company. The problem is that establishing each of these is just as much art as it is science.

Here’s why.

Related: Tenant Screening: The Ultimate Guide

Background Check Providers Aren’t Entirely Reliable

Property managers — ourselves very much included — don’t have the ability to do their own research into every applicant that comes their way. So we almost universally rely on one or more of a hundred different companies that puts together tenant-suitability reports. The problem is that these companies don’t have a huge staff of people who do the research, either — they rely on software that “scrapes” a bunch of data from a bunch of sources that they pay for access to. That data is only as good as the software that scrapes it, and no software is terribly good at distinguishing between, for example, Frank Keith Sr. and Frank Keith Jr. — much less handling identity theft in either direction (i.e. when the tenant has had their identity stolen or when they’re presenting themselves with someone else’s identity).

The result, as shown by a study in 2004, is that a jaw-dropping 79 percent of all tenant-suitability reports had at least one error. Even criminal background checks weren’t immune — while no studies have been done of them, an ABC investigative journalist revealed in 2008 that every single major criminal background check provider had “at least dozens” of court cases pending against them for damages caused by inaccurate criminal background checks.

Furthermore, most tenant-suitability reports are very judgmental and binary when it comes to court records. Civil and criminal court records are notoriously difficult to accurately judge, even for humans — leaving it to a computer to decide whether or not the little old lady on the other side of the table is suitable based on her 30-year-old court case wherein she sued a landlord for sexual harassment is just not right.

Credit Scores Are Not Infallible

Many landlords and property managers use credit scores in making approval decisions on applicants. I don’t have a problem with that in general, but many have minimum credit score requirements, which I think is a problem.

I can show you many credit reports with “acceptable scores,” where the applicant has nothing but collection after collection, but oh wait — they have a bunch of student loans they’re not paying on because they’re still in school, yet the software thinks they’re being paid on time.

We can also show you credit reports with only one or two bad accounts on them, but the credit scores are way low.

Related: 12 Tips I’ve Learned From Screening Close to 500 Prospective Tenants

The Human Side of Tenant Screening

That’s precisely why it’s possible to be too strict when it comes to tenant screening — because people aren’t accurately presented by any computer-generated report, no matter how much data the computer has access to. Not only are computers really bad at doing the job of collecting, sorting, and presenting the data in the first place, but they’re literally incapable of any degree of judgment.

Now, when you have an in-the-flesh human reason to believe that the tenant in front of you is unsuitable — whether it’s the fact that their car is a biohazard on wheels (a sure sign they’re not going to respect your house) or that their “previous landlord” phone number happens to show up on Facebook belonging to one of their best friends — there is no latitude given. But when the tenant-suitability report says one thing and the human being in front of you has given you a solid reason to believe something different, you should strongly consider further investigation. Discarding a perfectly valuable tenant because of a computer’s poor skill set doesn’t do anyone any good.

Landlords: What’s YOUR take — is it possible to screen too strictly?

Leave your comments below!

About Author

Drew Sygit

While in the mortgage business, Drew rose to a VP position at the first broker he worked for and then started his own company. In the pursuit of excellence, he obtained several mortgage designations and joined mortgage & several affiliate association Boards. He also did WebX presentations and public speaking. It was during this time he started personally investing in single-family rentals, leading him to also start Royal Rose Property Management with two partners. He also joined the Board of a local real estate investors association, eventually becoming its President. The real estate crash led to an offer from the banking industry to manage a Michigan bank’s failed bank assets they acquired from the FDIC. The bank acquired four failed banks from the FDIC, increasing from $100M in assets to over $2B while he was there. After that, he took over as President of Royal Rose Property Management. Today, he speaks at national property management conventions and does WebX presentations.


  1. Kim d

    “Before you form any thoughts about us operating in an easy market, note that we manage properties in the city of Detroit, so you know that many of the people we’re screening are not exactly exemplary when it comes to their credentials.”

    Wow! So if a potential client is from Detroit, automatically assume it’s OK to dump them/us all in the same boat, when it comes to credentials? Well, being a Detroiter all of my life, I take great offense to your thoughts and public statement. I guess everyone across 8 Mile has exemplary credentials. Trust me, I’m a Realtor and you can find this kind of issue on both sides of 8 Mile. Please choose your words more carefully, we already have plenty of Detroit bashers !!

  2. Kimberly H.

    Our company used to overscreen, and then went to a scoring system that works better. But deal-breakers like owing past landlords money and evictions are definitely deal-breakers. Haven’t come across any credit scores that don’t make sense yet through.

  3. Jerry Kisasonak

    Better to err on the side of over-caution. From what I’ve seen, most are not doing nearly enough to screen. Out of all our tenants who move out to go rent somewhere else, it’s very rare that we get a call from the new landlord/property manager. In 15 years I bet we’ve only had 3-4 calls. People aren’t screen enough.

    • Drew Sygit

      JERRY: we see the same thing! Not sure where are evicted tenants go, but we’re rarely contacted to verify their rental history.

      Another way to look at the lack of screening – it encourages bad behavior from tenants!

    • Dan Heuschele

      I had one evicted tenant (only tenant I ever have evicted) request/plead for a positive reference. When I called their previous landlord I received a positive reference. I wonder if it was a plead for reference.

      I did not respond to her plea which she correctly interpreted that it was not going to happen and I never received a reference check.

      If I used a single criteria for screening tenants (I use quite a few criteria) it would be the previous landlord reference check. I cannot imagine not calling the previous landlord to determine if the tenant was evicted, damaged the property, etc. I cannot even imagine it as a time saver because it is likely to be the opposite eventually (you may get lucky for a while but you rent enough and the luck will run out).

      As of today I have an empty unit that I will soon be screening tenants (hopefully starting real soon). I guarantee I will be calling their current landlord before I rent the place.

  4. JT Spangler

    My problem with the “human side” of screening is that if I don’t stick to my written guidelines for what I require from a tenant I open myself up to potential discrimination lawsuits.

    A potential tenant was basically begging me to look past her (below 600) credit score last week, and I told her I could do it if she could find a co-signer. She’s a single mother whose parents live in the same town as we do. And though she’s on good terms with them, they were unwilling to co-sign.

    In other words, the people who love her and her son, and know her best in the world were not willing to put themselves on the hook for her rent, should she not be able to pay. But me, the landlord, should take her word for it and overlook her bad credit?

    I was very happy to have written criteria I could lean on, because I just don’t feel comfortable with the liability I incur from making exceptions to those criteria.

      • Dan Heuschele

        I doubt that “Human Side” will make your case easy to defend even if done consistently. The issue is that it is subjective. If you turn down someone from a protected class because they did not pass your “Human side” criteria and they sue it will be costly even if you somehow prevail (I think it is unlikely that you will prevail). Similarly if you lower your standard for someone due to “Human Side” then everyone that you have ever rejected that has better measurable qualifications can take issue and sue.

        The only way I see this being safe is if you get all of the other applicants to withdraw their applications as suggested in Land Lording on Auto Pilot.

        I will stay with defendable criteria even if it results in the unit being vacant a little longer than if I accepted someone that otherwise would be rejected but due to “Human Side” was acceptable. I try to avoid using any criteria that can cause issue with housing discrimination and “Human Side” definitely qualifies as a criteria that I will avoid.

  5. Dan Heuschele

    I have quite a few issues with the post.

    “Not only are computers really bad at doing the job of collecting, sorting, and presenting the data in the first place”. This statement is untrue. Computers are great at these tasks.

    Computers are “literally incapable of any degree of judgment.” This part is true and I think a positive of letting the data (computer) do the screening as I agree with @JT Spangler that if you use your judgment to select tenants rather than the data you are open to lawsuits that you will find very difficult to defend. I can see your defense now: My judgment told me that X would be a better tenant than Y even though her credit score was subpar. I believed her when she indicated that her identity had been stolen and that the credit score is wrong. Good luck with that argument. Especially if Y happens to be of any protected class (know the protected classes of your state as most states protect more than federally required to protect) and X is a middle aged Caucasian heterosexual lady (probably not part of a protected class in any state unless she is handicapped).

    I have never regretted rejecting a tenant. One time I have regretted accepting a tenant that I could have rejected for cause. She was a house cleaner that had no regular employer (she was independent) and only had hard to verify income. Because of no regular employer/income her credit score was low but she explained it and showed that she had employment from a dozen sources that could cover the rent. She also had a fairly good recommendation from her current landlord. The problems here are quite a few: 1) Too hard to verify her claim of income (we did verify her top 4 or 5 income sources). 2) No credit to ding if she does not pay rent or thrashes unit above the deposit. 3) If she looses some clients the income is not there and there is no unemployment. When we evicted her for non-payment she requested a positive tenant referral even though she owed us money. She implied that it would be the only way she would pay us what she owed us. I question if that is how we got the positive landlord referral. We never provided an answer to her request and never received an landlord inquiry. If we had received a landlord inquiry we would have stated the fact that she got evicted for non-payment (being lawsuit aware we only provide verifiable statements and not opinions). We had already assumed regardless that we would not be collecting what she owed us.

    The only other time I wish I had rejected a tenant I had no cause (good credit score and large account balance as he had previously sold a house at profit (over a year earlier) but had not yet used the proceeds to purchase a different house) but I possibly could have rejected them as they were not a protected class (Caucasian traditional family). What could he claim if he was trying to sue? They left early and the place was trashed. I knew that they wanted to purchase their own place and believed they were likely to leave early (I had no proof of this). I also could not get a landlord reference as he previously lived in a church owned property that he was the pastoral (of course he would give himself a fine referral) and before that owned his own home. I kept all their deposit upon their move out which may have covered the damages (it at least was close) but not the time between tenants, etc. They were only there for maybe half a year (a lot of work and damage for 6 or 7 months).

    In general, our screening process has yielded good to great tenants especially when considering the demographics of our rental area (lower income, working class area). Our tenants are yard workers/gardeners (5 or 6), handyman, tow truck driver, truck driver (until this month 2 truck drivers), single military Mom, dry wall installers (2), nurse (2), etc.

    We try not to use “judgment” but the data when selecting a tenant. We can defend our rejections. We have gotten good tenants using this process (maybe a couple of times a unit went unoccupied for an additional week or so because we rejected some tenants). We will be continuing to make our selections based on the data and not our “judgment”.

      • Dan Heuschele

        I have never regretted rejecting a great tenant even if it has happened (no way to know) I worry about not rejecting a bad tenant.

        I have a unit becoming vacant this weekend and I expect to thoroughly check out the chosen tenant. I expect to have a great tenant in the unit by the start of the month. There in no reason for me to use “judgement” to select a tenant that the data indicates I should reject.

        • Katie Rogers

          It is a good thing that there are landlords who do not take your attitude or some great people would find themselves unable to get housing. For example, the person just returned from a long stint in a foreign country with a cash economy, and therefore their credit score is low even though there are no actual deficiencies. Maybe there credit report says nothing more than “insufficient data.” Or the visiting professor from another country. Again no credit or any other US-based info. In fact, sometimes these people have such a difficult time they offer several months rent in advance, although that is usually not be an option. Even that offer can be held against them as somehow evidence they are shady.

          I have written before that when I was a tenant I refused to divulge personal information such as SSN, driver’s license number, and bank account numbers. I am very thankful to the landlords who looked at the copious alternative documentation I provided, and rented to me. They got a great quiet long-term tenant who always paid on time (usually a couple days early), kept the property looking nice, and left it not only broom-clean, but move in ready.

        • Dan Heuschele

          Let the other landlords take this risk. If I can rent the unit to someone who does have this risk why would I choose to take this risk? I am getting nothing for taking additional risk. Maybe the other lardlord’s rent was too high and the only tenants they could get were the one with a short-coming or two.

          I do not intend to imply that some of the people I reject may not have ended up being fine tenants. However, they have more risk than other choices I have and I have no incentive to accept the additional risk so I do not.

          I would never provide a person keys to a unit that did not divuldge the personal information requested on the application. Why would I hand over the keys on a unit that is worth a lot of money without being provided the information to determine they are unlikely to cost me tens of thousands of dollars? That would be stupid. I’m a little surprised you found someone willing to rent to you without divulging this personal information. Maybe it is a different situation where you reside; maybe there are not the enough low risk tenants.

      • Dan Heuschele

        By the way my unoccupied rate over the last year has been under 0.5% (about to go up though as an over 5 year tenant is vacating this weekend) and over the past 10 years has been <1% not including remodel time. My point with this is that my tenant screening process has found me very good long-term tenants (a total of 3 late payment without notice in the past 10 years) especially for the demographics of the location of the units (mostly Escondido: lower income, working class).

        I see no reason to change my method of screening tenants.

  6. John Teachout

    One thing I like to do regarding screenings is use google or other search engines to verify info on the application. Do phone numbers match people or companies they’re supposed to? Does their “story” match readily available data?, etc. If someone presents false info of any sort, they’re disqualified as I can’t assume anything they told me is true.

  7. Russell Brazil

    Great article. I just had a conversation with a client who was a first time landlord. We talked about interpreting the data in the credit report and not just relying on the score. His potential tenant had a really low score that was dragged down by a bankruptcy in 2010, but all of his recent history was clean. I told him Id make a judgement call to accept.

    • Dan Heuschele

      I typically would reject if there is an alternate choice and this is why? His credit has another couple of years of being negatively impacted by the bankrupcy. A no payment on a rental likely will not stick much longer than the existing bankrupcy. Therefore the repurcussions for him not making his rent payment is less than for someone who does not still have a bank rupcy. He may turn out to be a find tenant but there is more risk than necessary if there are alternatives.

  8. Graham Garnett

    Tenant evictions are a nightmare for landlords and realtors alike. I completely agree that neither background checks not credit scores give you guaranteed end results. There are times when checks cannot give you the real picture of what it would be like having a particular person living on your property. This is why I always recommend face to face interviews. How you get along, how well you can communicate with each other and sometimes the gut feel are all valid factors to keep in mind while deciding on a prospective tenant. I definitely agree about the human aspect of tenant screening and have full faith in it.

Leave A Reply

Pair a profile with your post!

Create a Free Account


Log In Here