The Wall Street Journal recently published an article – Robots Are Taking Over (The Rental Screening Process) Landlords are using artificial intelligence to vet prospective renters.
I subscribe to the Journal and find it to be a top-quality publication.
I also found the headline to be somewhat misleading and would like to give some additional insight regarding using “artificial intelligence” when screening a rental applicant.
Using Artificial Intelligence with Tenant Screening
The premise of the article is that there are a number of background screening services are using artificial intelligence to predict the applicant’s willingness to pay rent.
A definition of artificial intelligence is “…the study of how to train the computers so that computers can do things which at present human can do better.”
The artificial intelligence discussed in the article is actually algorithms that have been developed based on historical applicant data analysis. These algorithms analyze credit and income history to provide a score or recommendation that predicts the likelihood of the applicant to meet their rent payment obligations.
TenantMagic uses TransUnion which provides their ResidentScore for their recommendation. Here is how they describe their Resident Score-
ResidentScores give landlords pertinent information about rental applicants; specifically, the reliability and level of risk they may bring. ResidentScore assigns a score from 350-850, with 850 being the best score possible. This score is designed to take credit report data into account when determining a tenant’s score.
We review the tenant’s credit history, just like a credit score. But we run the credit history through a different formula to compile a ResidentScore. Based on the score, and the property information entered, SmartMove will also generate a leasing recommendation.
The Limitations of Artificial Intelligence When Screening Tenants
Algorithm-based recommendations can be helpful, but they should be considered a tool that only gives part of the picture. By no means should a landlord rely solely on the recommendation to make a decision.
Many of the landlords that currently use TenantMagic transitioned from paper applications. They used either a very basic credit report or nothing at all when screening an applicant. I have had conversations with many of them that told me their horror stories because they accepted applicants without properly screening them. But relying strictly on a algorithm-based recommendation is not the answer and will not eliminate their problem tenants.
There are other factors beyond income and credit history that are critical when considering an applicant. TenantMagic also provides eviction and criminal reports. These reports are not incorporated into the algorithm-based recommendation.
I would consider eviction reports one of the more important reports to consider. If an applicant has been evicted in the past, it is likely they will be evicted again.
Criminal reports (where not prohibited by law) can identify convicted violent individuals and drug dealers.
The Need for Human Input
TenantMagic’s goal is to provide the best possible information to landlords and agents so they can make the best possible decision when considering a rental applicant. Our customer service agents do review screening reports with landlords and agents when requested to make sure they fully understand all aspects of the applicant’s background, not just the income and credit history.
Yes “artificial intelligence” and algorithms can play a role in determining a rental applicant’s viability, but it is a tool that definitely needs to be used with human interaction and judgement.
TenantMagic provides online rental applications with the most comprehensive tenant screening reports available (credit, criminal, sex offender, and eviction) to property managers and owners.TenantMagic is free to owners and managers – applicants pay the fee.
Feel free to contact me or register at www.tenantmagic.net