Screening for Bad Tenants Saves Time and Money

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( — July 16, 2022) — If you are a landlord, you know that bad tenants can drain your resources and time.

7 Steps to Screen Tenants for Rental Property

Landlords need to know how to screen potential tenants for their rental properties. To determine if a potential tenant is a good candidate, they run credit checks, verify income, confirm employment, conduct criminal background checks, and check the residence and landlord histories. 

1. Create a Tenant Screening List

If you have not already done so, you should immediately create a tenant screening checklist. A tenant screening criteria is simply a list of qualities you look for in a potential tenant, and conversely those qualities or characteristics that you find unacceptable. These criteria can be specific or general, but they are usually broad enough to ensure high standards and not exclude everyone.

This is an example of a screening list:

  • No smoking
  • Credit score minimum of 620
  • One pet should weigh less than 15 pounds
  • Solid work history and extended time at the current job
  • The income to rent ratio is 3:1, verifiable from the current employer and/or tax return
  • o criminal record of violence
  • Zero prior evictions and favorable landlord and previous residence histories

These tenant screening criteria will be used to select the best applicants who meet your criteria.

When creating your list, you must not discriminate against protected groups. Even if you believe you are knowledgeable about housing discrimination or protected classes.

2. Find out what questions to ask potential tenants

A landlord should check at least five areas of a tenant’s past and present. These include income, employment, criminal history, credit, and previous evictions, and residence history. When screening tenants, it is crucial to ask probing questions including:

  • Date of Birth
  • Social Security Number
  • Phone number
  • Current address

 This is your chance to conduct a thorough tenant screening check and confirm relevant information.  

Co-applicants, Co-signers are encouraged

You should be aware of potential co-applicants. Additional people who will be living in the unit and are legal-aged should be considered co-applicants. They should also have their backgrounds checked alongside the principal candidate. You should screen any co-signer if the tenant hasn’t had enough credit or rental history.

3. Screen tenants by checking their credit

Credit reports can help you determine if prospective tenants pay their bills on time. You can also use it to evaluate the applicant’s credit and to analyze how it relates to their income. 

The Fair Credit Reporting Act (FCRA) must be followed by anyone trying to obtain credit or background information about another person. Credit reporting agencies (CRAs), which include landlords, require companies to “accredit” credit information. This inspection is to verify that the company is legitimate, secure, and has a valid reason for pulling credit data from others.

4. Do criminal background checks

You must also check a renter’s credit history. To determine whether a prospective tenant has criminal records, check their state and federal criminal records. Criminal background checks should include a look at terrorist watchlists and registries of sexual offenders.

Double-check all reports when performing a criminal background search. An incorrect report or data error can cause a tenant to be denied. To ensure that you understand the information accurately, make sure to correct spelling errors and check for previous addresses.

Handling Negative Results

Sometimes, negative background checks can reveal bad results. This does not necessarily mean that you will deny a rental request. It could be that you would like to talk more about the results. Ask the potential tenant about the events surrounding the incident and their age at the time of the offense. Find out when they were released from prison and what rehabilitation efforts they made. Ask for references from former landlords and employers. Ask for proof of any mitigating circumstances.

5. Verify income & employment

You can verify income and employment to determine if the applicant is able to afford rent and if they have a stable job. The three-times rule is a common guideline for income. The three-times rule is a guideline for income. If the applicant’s monthly gross income is three times that of the rent, it is likely they can afford it.

To confirm their current employment status and job title, as well as their salary, check with the employer. The employer’s comments on job performance and past employment history will help determine if they are likely to continue working. As important as the salary is, job stability can also be important.

6. You can check previous addresses, landlords, and eviction history

Verify the previous addresses of any potential tenants. If the applicant is a renter, it’s worth looking into the landlord’s history. It is important to determine how much they paid in rent, and if the payments were made on time. Also, you should check with neighbors to see if there have been any issues with the applicant. You might be told by their current landlord that they are good tenants. It is important to verify the claims of other landlords.

You can ask your landlords questions like:

  • Was the rent paid on time by the prospective tenant?
  • They took good care of the property with minimal wear and tear at move-out?
  • Did neighbors complain about noise or pets?
  • Would you ever rent to them again?

You can also check with past landlords to verify evictions.

7. Interview Prospective Tenants & Co-Applicants

After you have reviewed the tenant screening documents and collected the application, it is time to interview the tenant. Give the tenant an opportunity to go over the documents and explain any discrepancies, it’s a good idea to do so with them. This interview can help you identify any potential errors in your findings.

The federal fair housing laws protect applicants against discrimination based upon race, nationality, age, gender, sexual orientation, family situation, disability, and gender. Unlawful criteria could lead to a lawsuit. It is a good idea to ask the same questions to each applicant.

After screening, accept or reject the applicant

After you have compiled your credit and background information and verified income and employment, it is time to make a decision. The total of all the data will indicate whether you accept, decline, or are in a situation that requires a decision.

You won’t always find the perfect candidate. Instead, focus on the “overall package”. You may be able to find a great candidate if one area is not perfect but the others are good. It is possible to trust your instincts about a candidate that does not appear suitable but who seems nice on paper. Many landlords have lost their jobs by not giving applicants a chance, even though the verified information indicated otherwise. Take into account the whole package, not just one personality.

It is better to choose a good candidate than to rent to one that is not the right fit. You have the right to reject a candidate if you see clear signs that they may be problematic. You must comply with the provisions of the Fair Credit Reporting Act.

The FCRA requires property managers and landlords to provide correct responses to candidates denied because of their credit reports or other related factors. These are called “adverse actions letters” and many property managers and landlords are unaware of the obligation to send them.

When you decline a potential tenant, be prepared with supporting documentation and adhere to the law. Online tenant screening allows you to access the data necessary to make objective decisions and not incorrectly deny candidates. Some software can generate adverse action letters automatically, while others offer templates that clients can use.

Bottom line

To determine if potential tenants will make good tenants, it is important to run background checks on prospective tenants. This includes checking their credit, income, employment, criminal, and other background checks. The use of tenant screening software or apps such as Weelo can streamline the process.