Don’t focus on credit reports alone
Too many landlords are fixated on credit scores and credit reports when considering rental applicants. Landlords often call TenantMagic and will ask me what is the minimum credit score they should use to accept and applicant? That is not the right question. Credit reports only provide a small portion of the information needed to make a qualified decision when considering tenants for your rental property.
Credit reports lack important information
An applicant’s credit history alone is not adequate to properly evaluate an applicant.
Eviction, criminal history and verified income are very important when considering a potential applicant and none of these are found in a credit report.
Eviction history is critical. Typically, if an applicant was evicted in the past, they will be evicted again. That is a landlord’s nightmare. The eviction process takes a long time and is costly. Property owners incur legal fees in addition to lost rent.
Criminal history is also crucial. I presented at a real estate investors group about tenant screening best practices. An elderly landlord told me a very scary story. The tenants in one of his properties stopped paying rent and would not respond to his phone calls. He went to the house to ask about the rent, was beaten severely by one of the occupants and ended up in the hospital for 2 weeks.
The tenant had a history of violent criminal activity. The landlord could have avoided the pain and suffering from the beating with comprehensive background screening.
Income Verification
You can find income information that was provided to the credit bureau when a credit card or loan was opened. Many times this is not up-to-date or complete information. At TenantMagic, we recommend that the agent or owner ask for 3 consecutive pay stubs. You should request the 3 most recent bank statements to verify the income deposits if the applicant is self-employed.
This method is far easier and quicker than attempting to get salary or wage information from the employer. Many large employers will direct you to a third party that requires a fee to verify employment and income.
Need more convincing about the need for comprehensive credit screening? Here is a forum from Curbed Chicago with more stories that will help convince you about the importance of tenant screening. This is just one of many sites with terrible tenant stories.
No tenant screening process will be 100% effective. But a comprehensive background search can significantly reduce the number of problem tenants.
Jay Apple is co-founder of TenantMagic, LLC TenantMagic provides online rental applications and comprehensive screening reports at no cost to landlords and agents. The applicant pays the fee.