It’s actually pretty straightforward – as a landlord; you should screen your residents for the following reasons:
- Protect Your Profitability – You want to rent your apartments to renters who will pay the rent on time and for the full lease term.
- Protect Your Property – You want to rent to responsible individuals that will take care of their apartment and respect the property you own.
- Protect Your Residents – You don’t want to put other residents and neighbors in harms way
Tenant screening helps you assess your perspective renters ability and willingness to pay the rent, do they have the income and employment to afford rent, do they have a track record of paying rent and do they have a track record of paying other bills.
It’s also an opportunity to assess the renters’ criminal background. One note about criminal background checks, there are restrictions and requirements for accessing and using criminal record data and they can change from state to state. You must check your best practices on accessing and using criminal data in rental decisions depending on the state your living in.
There are many types of resident screening services to considering using for your property or rental.
The first is called Traditional resident screening. This includes a full credit report plus a background check. There are third party companies that provide user interfaces, scoring, and other services that you can access that make this process easier.
The second type is Modified resident screening. Similar to traditional, the one major difference is that you don’t get access to a full consumer credit report. It has a summary level credit score or evaluation. However, the trade off is that less credit information facilitates easy access and less rigorous compliance requirements.
The third type of screening is Consumer Directed. This is the newest type of resident screening which came about because of compliance requirements. The difference between consumer directed and the other two types of resident screening is that the consumer (your renter) is directly involved in giving you access to their information. This is a significant change to the work flow compared to traditional screening. However it does provide you (as the landlord) with far more detailed information in a very secure and low cost way.
So what’s included in each of these types of resident screening? They all provide some form of consumer credit information, a criminal background check, eviction data and rental history data OFAC (Office of Foreign Assets Control) Data, and social security fraud check.
If you look at the table below, the data and information that’s included with each type of screening is almost identical with two big exceptions that are highlighted in yellow.
The first exception is with modified screening; you don’t get a full consumer credit report. You get a summary score or evaluation only. The second exception is with consumer directed screening, there’s a version which only provides credit information. It’s a full credit report, but that’s the only data you will receive.
In our studies we have seen a decrease in the use of traditional screening services. The reason for this is because the regulatory environment is tightening up and the qualification process is getting much stricter to the point where most landlords with small portfolios don't qualify.
Two of the biggest restrictions are that your office must undergo an onsite inspection by a third party and that most services don’t allow home offices. If your able to pass these qualifications (these are a big IF!) then the set up costs and transaction fees that are required are pretty expensive, especially at low volumes.
A few of the folks here at Rentometer were in the Resident Screening Business for 20 years before becoming rent comparisons experts. Feel free to reach out to us if you need advice regarding which type of resident screening service is right for you, and what service providers we recommend.
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