As a landlord, real estate agent, or property manager, you need to make sure that you have the right tenant in your rental property. A credit report delivered by any number of tenant screening services can put you on the right track instantly. If you’re wondering, ‘what is a screening report, and how does it benefit me?’ you’ve come to the right place.
So, how does a screening report work, and what value will you get from it? You will undoubtedly be keen to protect your investment and maximize cash flow by keeping voids down, but it is critical to find the most suitable tenants. You need to have an overview of the potential renter's financial situation and history to ensure that you are putting your property in the best hands. A thorough tenant screening report will give you all the data that you need to choose the perfect tenant.
What is a Credit Report?
Credit screening is the process of getting as much information as possible from both public records and financial agencies so that you can verify the information that your prospective tenant gives you on their application form. With this information, you can then evaluate how reliable and financially responsible they are likely to be as a renter. With a credit report you will have at your fingertips the following information:
- Records of financial history such as bankruptcy, non-payment of loans, and evictions
- Verification of personal identity information and previous addresses
- Credit history giving you data on their financial matters, outstanding loan, and credit card balances, and any history of missed payments
It is critical to collect all the information you can so you don't make an expensive mistake in the form of an eviction of an unsuitable renter.
What Information Does Your Tenant Need to Provide?
Your prospective tenant needs to give you written, dated permission to look into their financial affairs, then you can start the screening process. You will need the names, addresses, dates of birth, of each adult named on the lease agreement, as well as their social security number.
As the landlord or property manager, you will need to decide as to whether you intend to charge a fee for the service, deduct it from the rent, or waive it entirely, but whatever your policy, you must apply it equally. To comply with the Fair Housing Act, you should apply the same tenant screening policy to all applicants.
Online Screening Service
If you choose to use an online tenant screening service such as Rentspree, then the process is streamlined as you will only need to provide the tenant’s email address, and the tenant will be contacted and invited to complete their details. This comprehensive tenant screening report covers not only a credit report but also a background check, reference check, a history of their previous rental properties and whether or not they have been evicted in the past.
A considerable advantage of using an online service for the landlord is that you can access a secure portal with all of the information to hand on your laptop or smartphone. Tenants prefer to use their services as it is a ‘soft’ credit inquiry that doesn’t negatively impact their credit record.
In addition to credit information, the answer to the question of what is a screening report lies in additional details on the prospective renter. You want to avoid any issues that may cause problems down the line with your tenants, so it’s best to take the precaution of finding out as much information as possible. You should take note of the following information when making your decision,
- Criminal Record check and cross-reference with the Most Wanted lists and the National Sex Offender Registry
- Simple and clear eviction history report that includes tenant judgments and writs
Your screening report offers you the opportunity to gain a 360-degree view of your tenant’s background to make an informed decision about whether they are a good fit. By conducting a thorough evaluation of your prospective tenant, you can be confident that you’re protecting your investment.
What if There is a Problem?
However you chose to conduct the screening process you need to ensure that it is the same for all of your applicants. This can be achieved by agreeing on the acceptable background and financial parameters that are applied across the board regardless of ethnicity, sex, religion or any other protected status.
If the screening report uncovers issues, then the initial step you should take is to compose a list of tenant screening questions and go back to the tenant to see if there have been errors or omissions that they can resolve for you. You may be able to understand and allow some leeway if prospective renters have had short term financial difficulties that are now resolved.
If you are unhappy with the information that the report contains and decide not to rent to that applicant, then you need to follow a universal protocol to comply with the Fair Credit Reporting Act. An Adverse Action notice should be sent to any applicant that you deny, and this notice should include the reason for the denial and the contact details of the agency used to produce the screening report.
You can request additional information after you have seen a tenant’s screening report. If you are inclined to rent to the applicant but need further measures such as a co-signer or enhanced deposit, then you should also send an Adverse Action notice outlining your requirements and reasons.
When you are renting out your property, you are looking for a credit report and a screening report that you can be confident in. Make sure that you get your information from a reputable source that can provide all the information at your fingertips. This will ensure that you are satisfied with your choice of tenant. Invest in a comprehensive tenant report upfront to ensure you don't end up paying the price later on.