The tenant screening process is a step that no landlord should ever skip when finding new tenants. It helps you identify which applicants meet your standards and ensure that you can prevent, or at least minimize, potential issues in the future.
To do that, you can't just use something as simple as a credit report to see the whole picture. Effective tenant screening requires more than that, and below are the criteria you can use to find reliable renters for your investment property.
Key Highlights:
- Thorough tenant screening reduces risk and protects your investment. Evaluating applicants beyond basic checks helps prevent late payments, property damage, and lease violations.
- Multiple criteria provide a complete picture of applicants. Reviewing credit, income, employment, rental history, and background ensures you select reliable and responsible tenants.
- Income and employment verification ensure financial stability. Confirming steady income and job history helps determine whether tenants can consistently afford rent.
- Rental history and references reveal real tenant behavior. Past landlord feedback can uncover issues not shown in credit reports, such as disputes or property damage.
- Legal compliance is essential during the screening process. Following laws like fair housing and credit reporting regulations protects you from legal issues and ensures fair, consistent evaluations.
Screening Criteria Checklist:
Credit Check
One of the most common criteria when screening tenants is their credit score, and their credit history reflects their spending and payment habits. Red flags like late rent payments, high debt, and accounts in collections will show up. However, a low credit score doesn't necessarily mean they can't pay rent. Credit scores can also be affected by student loans or recent medical bills.
Employment Verification
Confirming a potential tenant's current employment status is necessary to reduce the risk of nonpayment of rent. You can contact the employer for verification. If you want to be more thorough, you may also look into their employment history to determine job stability. Their ability to hold a job also contributes to long-term tenancy.
Income Requirements
Employment and income verification are not enough. A prospective tenant must be able to pay rent on time and consistently, and that may depend on how much they earn. Landlords usually require tenants to earn at least 2.5 to 3 times the monthly rent, but that can depend on you.
Criminal Background Check
You can review an applicant's criminal history to ensure the safety of your tenants and your property. However, you need to be careful about the restrictions you set. You can end up violating federal Fair Housing laws by using an applicant's criminal record to unjustly reject them. If you're unsure, you can either hire a property manager or remove criminal histories from the background check altogether.
Rental History
A prospective tenant may be able to pay rent on time, but that does not mean they will immediately follow all your other lease rules. Credit history and income verification will not show you histories of rental property damage, tenant disputes, or other problems you might encounter. Other than their past evictions, you can also call past landlords to ask about things you can't find in tenant screening reports.
Pet Compliance
Pet policies are still necessary, even if you have a pet-friendly rental property. You need to set limits on the number, size, and breed of pets to prevent issues such as noise complaints, tenant harm, or property damage. You can conduct a separate pet screening process for the prospective tenant, since their rental history might not mention any behavioral issues.
Laws You Should Consider
Before putting a prospective tenant through the tenant screening process, you must consider certain laws that protect applicants.
Fair Housing Act
The Fair Housing laws prevent property owners from discriminating based on race, color, national origin, religion, sex, familial status, or disability. Violating fair housing laws during the rental application process can result in criminal proceedings and a damaged reputation.
Fair Credit Reporting Act
The Fair Credit Reporting Act is another federal law that protects the information credit reporting agencies collect about applicants. It states that landlords must inform the applicant when adverse action is taken based on the credit report.
Tenant Screening Process FAQs
What should I include in my criteria when screening tenants?
- You should check their credit history, employment verification, income, criminal background, rental history, pet compliance, and references from previous landlords.
Can potential renters deny access to information?
- Yes, especially for irrelevant details. However, if the rental applicant refuses to provide information required for the background checks, this may be grounds for rejection, given how it is crucial to finding reliable tenants.
Why is screening prospective tenants important?
- Background and credit checks help you determine whether prospective renters will comply with your lease agreement and pay rent on time. Being thorough during the rental application process will protect both your rental property and existing tenants.
Can I only check credit scores during the tenant screening process?
- No. An applicant's credit history tells only one side of the story, namely, past financial responsibility. Employment verification can confirm job stability, income verification can show whether they meet the minimum income to afford the rental unit, and eviction history can tell you about their behavior.
Should I hire tenant screening services?
- You can. These services typically look beyond an applicant's financial responsibility by setting a minimum credit score. They also consider other factors to determine the potential tenant's suitability for your rental property.
Can I still deny a qualified applicant?
- Yes, as long as the decision does not violate anti-discrimination laws by rejecting them based on protected characteristics like race, color, national origin, religion, sex, familial status, or disability.
Why Ten20 Property Management is Your Best Bet
The rental application process is a tedious aspect of property management, especially if you have multiple rental units to fill. With a professional property manager in your corner, you can expect an effective screening process to find your next tenant. We conduct:
- Credit Score
- Criminal History
- Eviction History
- Debt-to-Income Ratio
- Employment Verification
- Calls ot Previous Landlords
Our marketing efforts can even provide your rental listing with the exposure it deserves. Stick with us, and you will stand out in the rental market in no time.
Feel free to reach out to learn more about our services.
