Landlording & Rental Properties

Tenant Screening: 6 Reports and Services Available to Landlords (Plus, 3 Mistakes to Avoid!)

Expertise: Landlording & Rental Properties
16 Articles Written
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Properly screening your rental applicants to find qualified, reliable tenants is one of the most critical steps you will take as a landlord or property manager. In fact, prioritizing strong tenant screening practices is one of the best ways to maximize profitability on your real estate investment. (1)

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Good tenants mean on-schedule rent payments, less chance of property damage, and fewer lease agreement violations. Bad tenants can reduce your profits and be extremely difficult to get out once they’ve already signed a lease and moved in. 

The best way to find the right tenants while avoiding any potential discrimination issues is to educate yourself on Fair Housing laws (as well as state and local laws) and create an official set of screening criteria that you apply equally to all applicants. Developing this will streamline your application process by weeding out potential tenants who do not meet your minimum criteria. It also minimizes the chances of a discrimination claim, as this process will take your subjective opinion out of the equation.

Related: The Complete Tenant Screening Process—Pre-Screening

Types of Tenant Screening Reports

Tenant screening reports should be used to discover potential tenants’ financial responsibility and rental history. These reports are usually accessed online and processed with information provided by the tenant on their rental application.

tenant filling out rental application

  • Credit reporting: Reviewing credit history and debt obligation will give you a good idea of your potential tenant’s financial responsibility and their ability to pay rent on time, every time. Poor credit can be a red flag on an application, unless there are unusual circumstances.
  • Criminal reporting: Criminal reporting can be tricky, because there’s always a chance someone with the same name as your applicant has been convicted of something. Landlords can legally deny an applicant based on a criminal record if the past crime relates to a lack of respect for property or safety of other individuals. But be cautious with this—landlords cannot have a blanket policy to deny any applicants with a criminal record according to the Fair Housing Act. 
  • Eviction reporting: Many tenant screening services or credit reports will show evictions that were the result of a court order. However, be sure to verify rental history and references to speak with other landlords that had your applicant as a tenant. Evictions are complicated and time-consuming, and they put you at risk of losing rental income during the process. 

Related: The Complete Tenant Screening Process—Credit Check & Background Check

What to Look for in a Tenant Screening Service

Before you can confidently screen your tenants, you’ll need to select a tenant screening service provider that fits your needs. The most essential considerations when researching services are customer service, speed, and quality of data. 

budgeting-apps

  • Customer service: Choose a reliable service that cares about your needs and offers open, two-way communication. A provider with a well-trained staff to support and educate you will be essential in the long-run.
  • Speed: You want your screening results to be high quality and in depth—but not take days to compile. The longer your screening process takes, the more likely you are to miss out on qualified applicants who applied elsewhere. 
  • Quality of data: Most importantly, the data from your provider need to be accurate. Look for tenant screening providers who get their credit reports from a reputable credit bureau. Make sure the provider you select uses high-quality sources for background checks. 

Tenant Screening Mistakes

Here are some of the most common mistakes I’ve seen landlords make when it comes to tenant screening reports:

  • Not screening every single tenant: Some property managers choose to only screen applicants they are skeptical about, but this isn’t a great approach. You can’t judge a book by its cover, so for your own protection, make sure you screen every individual who plans to live in your property. A blanket screening policy can also protect you against discrimination claims.
  • Starting the screening process too late: Start the screening process as soon as you have an interested tenant, or you’ll risk having an unoccupied unit and higher vacancy rates. Unoccupied units are the biggest income killer.
  • Ignoring subtle red flags: Sure, a history of multiple evictions or a lengthy criminal record are big red flags, but there are other minor warning signs landlords should keep an eye out for during the application process. Did the tenant complain about the rental application process or complete the process incorrectly? Are their past landlord references verifiable? Have they had more than three addresses in the last three years?

Tenant screening is a necessary part of being a landlord, so set up a system that will work for you and use it every time.

Sources

  1. https://www.forbes.com/sites/forbesrealestatecouncil/2017/07/12/top-three-ways-to-maximize-your-real-estate-investment-profits/#5501b2417962

Are there any valuable methods of screening applicants I failed to mention above? 

Add them in the comment section below.

Aside from being a landlord and real estate investor himself, Nathan founded Rentec Direct, a software company that serves the rental industry. Today he works with over 13,000 landlords and property managers by providing them automation software and education to effectively manage their rentals.

    James Free Rental Property Investor from Fort Collins, CO
    Replied about 1 month ago
    Editor's note; half of this advice is illegal now in Minneapolis! http://www.startribune.com/small-landlords-fear-limits-on-tenant-screening/560181422
    Cindy Larsen Rental Property Investor from Lakewood, WA
    Replied about 1 month ago
    I live in Washington state, and there are some restrictions on screening here too. And we have several landlord associations fighting back. All landlords need to know the laws where their properties are. Once you know the laws, you can develop legal screening criteria that will work for you. I screen by posting my requirements in my Zillow adds. Then, because so many people dont read the whole add, I put the tenant requirements in the email that I send to potential applicants if they want to see the property: Before you make an appointment please ensure that you (and any adults who will be living with you) meet the stated tenant requirements: 1. your credit score is at least 620 or you have a cosigner with at least 620 credit score 2. you have no Felonies in the last 10 years and no gross misdemeanors in the last five years and 3. your combined gross income (for all adults who will be living with you) is at least three times the rent. If income is a problem, a cosigner can help with this too. These tenant requirements help ensure that all of my tenants have good neighbors, and that no one has trouble paying the rent. I look forward to hearing from you. Cindy” This results in about 3/4 of people who click on “request a tour”, or “apply” never returning my email. That is great because I then can focus on applicants who believe they are qualified. Then I make them pay an application fee and run mysmartmove.com criminal and credit background checks on applicants, as well as asking for five years of rental and job history contacts. I then take the time to actually contact those references and find out what kind of tenants they are and if they are reliable people who are likely to continue having a job. It takes some time but I end up with great tenants. I document everything, and follow the exact same process with every potential tenant, and I tell them I am doing that, and that I make sure to comply with fair housing laws. So far, no complaints. And my tenants all pay first, last, and deposit up front. All that said, if the tenant associations ever outlaw criminal background checks, I will sell, and buy property in a different location. Doing a criminal background check once saved me from renting to a very nice couple: It turned out he was just released from prison. crime: running a meth house. Even with all the checks that you can think of to do, you’ll occasionally run into a situation that you can’t think of a check for ahead of time. I recently had a tenant break a lease with no penalties because her violent ex-boyfriend found out where she lived. The law in my state says: landlord loses with no recourse. The fact that she knew about the violent ex-boyfriend and did not mention it, and is a criminal justice student who also knew about the law before signing the lease, is just tough luck for me. The law wants to protect tenants who are victims. I am all for that. But the fact that I lost two months rent, due to the ex-boyfriend’s behavior was not fair. If the government wants the tenant to be able to break the lease, the government should pay the rent until the property is re-rented, or even better, make the criminal pay, not cost the landlord money. Landlord tenant laws full of things like that, where they are trying to protect the tenants and they don’t even consider the impact on the landlord. I think the basic assumption in the laws is that landlords are all rich evil people who can/should be penalized with impunity. What we really need is a nationwide landlords union, so we can stand up for what should be our rights. My first pick on an issue to resolve would be bogus emotional support animals. As the laws now stand anyone who doesn’t feel like paying a pet fee or pet rent can go online and fill out a form and get a certificate saying their pet is an emotional support pet. And if you don’t accept pets in your rental, well you have to accept their pet anyway. For free. And you can’t even increase your security deposit. Landlord tenant laws need to be revised to both protect tenants and be fair to landlords. If society believes that some people should be given monetary advantages that other people don’t get, then society should pay for the costs of those policy decisions, not landlords.
    Cindy Larsen Rental Property Investor from Lakewood, WA
    Replied about 1 month ago
    Sorry for the badly formatted post. must be an error with the bigger pockets site. I had a bunch of separate paragraphs. sorry it is hard to read.
    Katie Rogers from Santa Barbara, California
    Replied about 1 month ago
    Did the tenant complain about the rental application process or complete the process incorrectly? This should not be a red flag against the tenant. It should alert the landlord that maybe there is something wrong with their process. Too many landlords expect every blank to be completed on applications that ask invasive questions. When I was a tenant, I vetted prospective landlord. A landlord who groused when I left invasive questions blank is a red flag. One rental application even asked for mother's maiden name. When I asked the purpose of the question, the landlord said she needed it in case the bank refused to give her information about my account when she called. In other words, she planned to impersonate me.
    Wenda Kennedy JD from Nikiski, Alaska
    Replied 21 days ago
    I always screen my tenants no matter what. Once upon a time, I rented to a disabled little old lady with her "service" dog. She was on a walker. She had Section 8 housing. I didn't bother to put her through my normal process. What could that little old lady do? Come to find out, she was an ex-biker and was currently the king-pin of the local heroin trade. Her "service" dog was her guard dog who bit anyone who came around. She was on probation for bank fraud. That had gotten her on the charge they could make stick -- like they got Al Capone for tax evasion. Not my best moment as a landlord. I'm thinking about writing a book...