Knowing how to screen tenants is an important step in finding quality occupiers for your rental property. The process involves collecting tenant applications, conducting background and credit checks, and verifying income and employment. High-quality tenants pay on time and take good care of your property.
Bad tenants are a nightmare for landlords. In fact, nearly all respondents (93.3%) to a recent NMHC poll reported experiencing fraud in the past twelve months. The most common forms of fraud included falsification of income or employment documentation (84.3%), misrepresenting information on applications (80.0%), and identity theft (70.0%).
Poor tenant selection often leads to these issues. Our guide walks you through the ins and outs of tenant screening, so you can choose (and retain) high-quality candidates for your rental property.
Why Is the Tenant Screening Process So Important for Landlords?
An effective tenant screening process is not just about finding applicants who can pay rent on time. You also need to find tenants who will respect and follow the lease terms, including property maintenance responsibilities.
Choosing a candidate with rule-abiding behavior and a proven track record of financial responsibility protects your property and ensures a steady income.
The Consumer Financial Protection Bureau (CFPB) recently reiterated that consumer reporting companies must provide a person's complete, accurate, and up-to-date consumer file upon request. They warned that inaccurate, incomplete, and old information must not appear in background check reports.
What Are the 4 Key Steps on How to Screen Tenants?
An effective tenant screening process helps you find the best candidates for your rental property. Follow these four steps to find tenants who will pay on time, respect your property, and ensure peace of mind:
1. Collect Tenant Applications
Picking the right tenants starts with asking the right questions. Consider including these questions in your rental application:
- What is your personal information?
- Do you currently rent, and if so, where?
- When are you looking to move in?
- Will you agree to a background and credit check?
- Can you provide your pay stubs for the last three months?
- Who will be living in the property?
- Have you ever broken a lease or been evicted?
When reviewing rental applications, watch out for these common red flags:
- Vague information
- Gaps in rental history
- Jobs that can't be verified
- Withholding permission for background and credit checks
- Frequent evictions
These rental application tips help you identify and weed out potentially problematic candidates - and remain with those who can take good care of your property and pay on time.
2. Run a Background Check for Renters
This step helps you find information beyond what prospective tenants share in the application form. A full background check provides an overview of a prospective tenant's:
- Personal identity
- Employment history
- Criminal history
- Eviction records
This step helps you avoid high-risk applicants without overcomplicating the process. Watch out for patterns that suggest trouble, like repeated evictions or serious criminal offenses.
3. Perform a Tenant Credit Check
A credit check shows how well a prospective tenant handles their money. It typically includes:
- SSN verification
- A resident score
- A full credit history
A low credit score isn't automatically an indication of a bad tenant. Additional issues to look for include:
- Consistent late payments
- High outstanding debt compared to income
- Accounts sent to collections
- Multiple evictions in recent times
The best candidates have a proven track record of paying rent, utilities, or other bills on time.
4. Verify Income and Employment
The primary purpose of income and employment verification is to determine if a prospective tenant can afford the rent. A rule of thumb is that rent should not exceed 30% of your gross income.
Ask for recent pay stubs and bank statements to determine the candidate's ability to afford rent.
Stay Compliant to Protect Landlord-Tenant Rights
Tenant screenings aren't designed to protect landlords alone. Federal housing laws apply to all property owners, regardless of property size. These laws require fair treatment of tenants and prevent discrimination.
Subject all prospective tenants to the same screening procedures. Choose your tenants based on who best matches your checklist.
Frequently Asked Questions
What Is the Most Important Step in Screening Tenants?
Each step is important, but verifying the information provided in the renter application is perhaps the most critical. The application sets the tone for an effective tenant screening process.
Incomplete or inaccurate applications make it difficult to gather the information needed to evaluate potential tenants.
How Long Does a Tenant Screening Process Take?
There is no magic number, but it typically takes one to three days. The process generally takes a shorter duration when references respond quickly.
Seeking out professional services can help speed up the process.
Should I Reject a Tenant Due to a Low Credit Score?
A low credit score is only a contributing factor. It shouldn't be the sole reason you dismiss an application. Consider other factors, such as current income, employment status, and rental history, before making a final decision.
What Should I Focus on When Doing Background Checks for Renters?
Confirm the personal information of each applicant to ensure they are who they claim they are. Also, research their criminal history to protect yourself, your property, and your community. The last thing you want is to have a dangerous tenant on your property.
How Do I Avoid Discrimination When Screening Tenants?
The best way to ensure a fair screening process is to apply the same rules and requirements to everyone. This ensures the upholding of landlord-tenant rights throughout the process.
Is a Tenant Credit Check a Must?
A tenant credit check is not a necessity but a requirement. It gives you a clear picture of a prospective tenant's financial behavior. Look beyond their credit score and assess their current ability to afford rent.
What Are Common Mistakes Landlords Make During Tenant Screening?
The biggest mistake landlords make is ignoring obvious red flags early on in the tenant screening process. Common warning signs include late payments, high debt-to-income ratios, and a history of frequent evictions.
Discover Smarter Ways of Managing Your Property Today
One of the greatest attributes of an effective landlord is knowing how to screen tenants. Proper tenant screening reduces tenant-related issues, protecting your property and ensuring peace of mind.
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This article was prepared by an independent contributor and helps us continue to deliver quality news and information.
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