Most landlords in the US screen an average of 2 tenants per vacancy. If you’re a property manager taking care of multiple units, that can take a lot of time if you do it manually. There are better options to shorten the tenant screening process.
As a property manager, tenant screening is essential for finding qualified tenants for your rentals. Here are some of the steps involved in rental background checks and ideas to help you streamline the process.
Background Check Basics
Rental background checks are essentially a screening test for suitability. A landlord or property manager performs this screening to decide if a tenant is a right fit for a rental unit. The process can be complex, and it’s important not to miss any of the details.
You want to find the best tenant for your property. Tenant screening allows landlords and property managers to avoid potentially risky renters. It can take a bit of time to perform the checks, but it will save you money in the long run by preventing hassles with rent collection or damages to your unit.
You can speed things up by automating as many of these steps as possible. The rules around background checks vary in different states and municipalities. Some locations have question restrictions, and others prohibit your ability to perform a criminal records check.
It’s essential to understand what you’re allowed to ask for. Avoid violating any Fair Housing laws by performing the same background checks for all applicants, regardless of their race, nationality, sex, or other differences. You don’t want to be accused of discrimination.
Before you perform a check, the tenant must authorize it. Here are the basics of a background check.
Credit Report
An applicant’s detailed credit history may reveal amounts owed to a previous landlord. That would be a major red flag against a prospective applicant.
You can request a credit report from a reputable agency such as TransUnion or Equifax. The report will show their credit use, credit score, specific payment histories, and other account information.
Reading a credit report involves understanding the five basic components.
- ID information includes their name, current address, and recent employment history
- Fraud indicators are red flags to review carefully
- Tradeline summary shows active credit accounts, loans, and debt
- Credit score
- Inquires from other companies during the past two years
A credit score is a number between 350 and 850, and it indicates someone’s credit behavior. The higher the number, the better the applicant’s credit history.
Income Verification
This step allows a property manager to see if the applicant earns enough money to pay their rent. Most managers use a measurement standard such as a rent-to-income ratio. This ratio says someone should earn three times their monthly rent to afford to make their payment.
Managers ask applicants to show proof of their current income level. They can provide a recent paystub or their income tax return. They may request contact information for their current employer or their previous employer if they’ve just changed jobs.
When an applicant’s income level is too low to qualify, it’s possible to allow a co-signer to guarantee the rent. Always perform a complete screening on any co-signers if you consider this step.
Resident Score
Some tenant screening reports add a resident score tailored to landlords and property managers. It assesses the reliability and level of risk for the applicant. Resident scores use these items.
- Payment track record
- Credit being currently used
- Credit currently available
- Credit performance or history
- Current inquiries on their record
Screeners use these five components to create a resident score which may indicate if the applicant will need eviction in the future. Generally, a resident score of over 560 is a better candidate for tenancy, although a slightly lower score is possible.
Eviction Report
Ask applicants if they have ever been evicted. There are some circumstances when the tenant may not be the one at fault, so it’s crucial to discover what caused the eviction. Document their explanation to ensure you meet local fair housing guidelines or laws.
Criminal Background Check
If you find a tenant with a criminal history, it’s best to allow them to explain the circumstances. The criminal checkreport will list any convictions, whether they were felonies or misdemeanors, and it will give details of the criminal behavior.
You can take their explanation into account when preparing your report. Again, documentation shows that you followed the guidelines.
Streamline the Process
If you’re asking “how long do rental background checks take,” the answer is it might be several hours or several days. The amount of time it takes depends on when an applicant gives their approval. It also depends on how organized you are and whether you try to do the steps yourself.
Prepare a checklist to help you keep on track. Use a spreadsheet or other method to track the results and update it as the data comes in. Include websites and additional information so you can request the records using each applicant’s data.
Another option is to find a service that will take care of these details for you. Some providers allow prospective tenants to submit applications online. If you use a screening service, they have the tools required to speed things up.
The online dashboard gives tenants a way to provide preliminary credit information during the application process. A property manager can add a rental listing with their specific criteria, then direct applicants to fill out their information online.
Property managers can view applications online. Updated results are available in real time. This system keeps track of applicants, and you can mark them for follow-up or categorize them as you make your initial decisions.
Rental Background Checks
We streamline the entire tenant application and screening process with our easy-to-use online system. Rental background checks are available in real time. You’ll be able to respond to the tenant and homeowner with results ASAP.
Contact RentSafe for the best solution to your tenant screening needs. We can help you make educated decisions on prospective renters’ qualifications.
