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Smart Tenant Screening 2023: Practical Background Check Most Landlords Use

Posted by support on March 15, 2023

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Tenant screening is one of the most difficult duties of a landlord. Thankfully, resources are accessible by running a background check as part of the tenant screening procedure. If you know how to decode that data, those records may validate the circumstances of the application and interview and disclose information that was not explicitly disclosed.

Landlords carry out such checks to ensure prospective renters have a good financial history, a history of on-time rent payments, and a history of property maintenance.

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Tenant Screening 101

Unfortunately, not all tenant screening procedures were made equally, and no landlord wants to sign up a terrible renter. Candidates put their best foot forward, and the more they have to conceal, the greater lengths they will take to cover up information that would disqualify them.

Finding out how much protection the firm will give you against tenants who become problematic in the future is vital because the screening process might vary greatly from company to company. One eviction is all it takes to realize how crucial this component of the management company’s responsibilities is. In addition to the questions listed below, get a copy of the rental application they employ to determine whether it is a standard or personalized form.

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Asking the following questions to the management businesses you interview will give you a sense of the level of protection they will offer you during their screening process:

  1. Will they remove a home from the market before a lease is signed to “hold” it for a tenant? If so, are there any fees? A backup plan is a good idea if it doesn’t work out.
  1. What mechanisms do they have in place to defend against rental scams? Have they ever fallen for one? Scams are expanding in scope and sophistication. Local con artists will steal your ad, enter your home, and display the unit to demand a “security deposit” and flee. These are not only Nigerian scammers. Also, we’re not kidding.

Can a landlord check my credit?

Fee-for-service companies like Equifax and Tica, which provide financial and tenancy-specific searches, are used by private landlords who manage their properties and property managers hired to handle the task on behalf of owners, to conduct background checks. Before deciding to lease out their investment properties, landlords can undertake credit checks.

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Private landlords can pay “per check,” whereas real estate brokers typically have subscriptions that permit several checks. Both times, the prospective tenant must submit a government-issued identity as the foundation for an online check.

Why do landlords examine my credit?

According to Finn Simpson of Belle Property in Dee Why, credit checks enable property managers to make the best choices for their landlords.

“A poor credit check indicates that the tenant has a bad track record of honoring financial obligations. If so, we’d prefer not to appoint them as tenants because doing so could put the landlord out of pocket and make it difficult for the agent to collect rent from the renter”, he said.

It’s simple for someone who is “blacklisted” or has had other financial problems in the past to hide this on the typical rental application, the expert claimed. “When the rent is late, and the property is damaged—things a landlord might have discovered at the application stage—relying on your gut instinct won’t count for much.”

Do landlords perform “soft” or “hard” credit checks?

The application procedure that private landlords and property managers have always handled themselves is referred to as a “soft” check. It involves reviewing the supporting documentation and asking general questions about the applicant’s financial situation to ascertain whether they can pay the rent.

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“Responsible” refers to someone who can act responsibly and with integrity. A tenant must consent before conducting a hard check because it will be recorded and may impact their credit score. While renting a property, various credit checks can be performed. Image from realestate.com.au/rent

What is a credit check composed of?

Credit checks scan credit bureaus, detecting bankruptcy information and whether a person has been barred or prohibited from operating a business. It will reveal any court cases they have been a part of and whether their names have ever been on “blacklists” of tenants. The expert explained that being included on a tenancy database would indicate that the tenant has a history of failing to pay rent or seriously damaging a building.

On the other hand, landlords may also check how frequently a candidate has been looked up in a database, which is helpful.

“If the current market is such that a renter should be able to find a house, yet they have been looked up on a database several times in a short period, it shows they have applied to many properties but have been turned down. This may cause alarms to go off.”

Even qualified candidates might need to apply to several places if the rental market is extremely competitive and there aren’t enough properties available. Many searches, in this case, shouldn’t be seen negatively on the candidate. It’s simply a reflection of the times, she said.

What makes a Great Tenant?

A seasoned landlord looks for two key qualities in a potential tenant: the ability to pay rent on time and the capacity to maintain the property. 

An unreliable tenant can cause thousands of dollars in damage and missed rent for the landlord. To increase your chances of finding a tenant with the crucial qualities of a good renter, follow the procedures listed below.

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Screening Credit Card For Tenant

Professional property managers and individual landlords have access to credit reports. Their credit report reveals the tenant’s ability to fulfill their financial obligations and make bill payments.

Landlords and property managers can obtain a comprehensive credit report or a credit report card, two different credit reports. A full credit report offers you a FICO score, the primary distinction between one and a credit report card. You will receive a score range from the credit report card.

What to look for when screening a tenant’s credit report Credit Scores?

 The effects of making a decision based on a score may only sometimes be consistent across all major credit reporting agencies since various credit reporting agencies report scores differently. A FICO score can be obtained and vary from 300 to 850, with 850 representing perfect credit. If the renter just lost their home through a short sale or foreclosure, their score may be considerably lower nearly completely due to the loss of their property and should be considered that way.

Credits. When a score is provided close to or over 650, you can typically rely on the tenant as a reliable payer. It is still good to check the report’s content to ensure that no present duties are past due. The best indicator of whether a tenant will pay rent is whether they are making monthly credit card payments. Current debts that are past due are a clear sign that the tenant is struggling to make ends meet and might not even be able to pay the rent.

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Late payments on a mortgage. Most property managers offer a special exception when a prospective tenant’s credit history reveals missed mortgage payments or defaulted mortgages. Most landlords I’ve spoken to don’t turn away potential tenants because of bad credit from losing the property. These former homeowners tend to be extremely pleasant and responsible renters, provided other responsibilities are current.

Medical expenses. Medical expenses may also be a factor in a low credit score. Even a brief hospital stay can result in tens to hundreds of thousands of dollars in medical expenses for someone without insurance. Since it is generally not practical for most people to pay these costs at the time of the visit, they frequently become collections. 

According to interviews with multiple landlords, medical bills are frequently overlooked or given less weight when evaluating a prospective tenant’s creditworthiness. Yet, it’s crucial to remember that the tenant will likely have some of their income garnished to pay these obligations. This affects your income-to-rent formula and lowers your ability to pay the rent.

Report on criminal activity for tenant screening

Landlords and property managers have access to a variety of criminal reports. The most well-liked and convenient is a nationwide criminal history.

A nationwide criminal history report compiles criminal information from all the states to give a clear picture of an applicant’s criminal background. In contrast to credit data, criminal data is not indexed by social security numbers. Instead, names and dates of birth are frequently used for criminal index data.

Even yet, identifying criminal activity can be trickier than with credit because some jurisdictions only collect criminal data by name.

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Here are some suggestions for making the most of your criminal history reports.

  • When ordering your criminal report, double-check that the name and date of birth (DOB) are accurate. A candidate might mistakenly or knowingly put their DOB incorrectly on your application form, which could make a criminal background appear clean when it may not be. Requesting a copy of a photo ID along with the application will allow you to confirm the date of birth, which is the best approach to ensure the information is obtained accurately.
  • Check the history of addresses. The county or city of the offense is normally listed on each retrieved criminal record. To reduce the results to a manageable list, many screening vendors may cross-match these records with the applicant’s address history report; nevertheless, if your vendor gives you a complete list, it may be fairly lengthy.
  • You can acquire an address history or an SSN verification report that includes an address history to see if a criminal record matches your applicant. The application likely matches the crime if a former address corresponds to the city where the incident occurred.
  • When in doubt, request a report with more information. You can request a county report on the applicant if the national or state-level reports you’ve run on them are empty. This report might provide extra information.
  • Examine your local, state, and federal regulations regarding the permissible application of criminal histories. The Fair Housing Act states that a housing provider may not outright prohibit consideration of any criminal background and may only consider arrest records that result in convictions. Likewise, some jurisdictions have made utilizing a criminal background check’s findings unlawful to screen prospective tenants.

A Report on Evictions for Tenant Screening

The most crucial aspect of renting to a new renter maybe if they have ever been forcibly evicted. You can learn more about a rental applicant’s history by consulting an eviction report.

A renter can evict their rental home in one of three ways:

  1. They left voluntarily and paid their rent on time. There should be no history of evictions for these tenants.
  1.  They were asked to leave by their landlord (commonly called an “eviction”) due to non-payment or other circumstances, and they complied with the landlord’s request. Because it is a voluntary eviction, this kind of “eviction” won’t appear on an eviction report.
  2. When the renter was requested to leave by the landlord but refused, the landlord filed for a court-ordered eviction and evicted the tenant. This will appear on an eviction report as it is considered official.
  3. An eviction report is essential for tenant screening since it provides information on the most expensive and drawn-out eviction. A court-ordered eviction may take several weeks at best and several months at worst. You are losing a ton of money because you can’t move in with a new renter and aren’t getting rent from the outgoing tenant.

References From Personal, Professional, and Landlords For Tenant Screening

Verifying the facts a prospective renter has provided on their rental application and conducting an interview with them are the crucial final steps in the tenant screening process. The reports mentioned above can verify several of the facts listed on the rental application. As part of your tenant screening procedure, you should contact the applicant’s workplace, previous landlords, and other references.

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If there is any indication that the tenant gave false information on your application, or if the information does not add up, that is an immediate sign of danger and a reason to reject the application.

Meanwhile, an essential part of rental management is meeting and doing background checks on all people who will live in the home. In most jurisdictions, it is common and legal to charge a fair application fee to pay for the costs of generating the comprehensive reports mentioned above.

Tenant Screening with PlistHub

Online tenant screening report bundles on potential renters are available for landlords and property managers to order.

Some services charge various prices for individual reports or report packages. While other services permit the landlord to obtain and review the tenant screening reports themselves, some tenant screening services demand that a rental applicant order a credit check on themselves and grant you access to read the report.

You must get consent before acquiring a credit report on a rental applicant to review it. Ensure you obtain, access, analyze, and store consumer reports and tenant screening materials legally, as numerous rules govern their use.

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