Level Up Your Tenant Selection Process

Finding the ideal tenant is crucial for protecting your investment. This listicle outlines six key tenant screening criteria to minimize risks and select reliable renters. Learn how to effectively evaluate applicants using credit history checks, income verification, rental history and references, criminal background checks, eviction history screening, and employment verification. Applying these tenant screening criteria helps ensure tenants pay rent on time, respect your property, and foster a positive rental community.

1. Credit History Check

A credit history check is a crucial component of tenant screening criteria. It allows landlords to evaluate a potential tenant's financial responsibility by reviewing their credit report. This report provides a snapshot of their financial behavior, including payment history, outstanding debts, credit utilization, and any negative marks such as bankruptcies or collections. Landlords use this information to assess the likelihood of applicants paying rent consistently and on time, minimizing the risk of late payments or defaults. This method helps protect your investment and ensures a steady stream of income from your rental properties.

The infographic visualizes a simplified decision tree for evaluating a prospective tenant's credit history. It starts with checking the applicant's credit score.

This decision tree simplifies the credit check process. Landlords can use this flowchart to guide their decision-making, starting with obtaining the applicant's credit score. If the score meets the minimum requirement (e.g., 620), the landlord proceeds to check for negative marks like bankruptcies or evictions. Even with a good score, the presence of such marks might lead to further investigation or rejection. Conversely, a low credit score doesn't automatically disqualify an applicant. The landlord can consider extenuating circumstances or request additional documentation like proof of income or positive rental references.

Features of a Credit History Check:

• FICO Score Evaluation: Most landlords look for a FICO score of 620 or higher, though this can vary.
• Payment History Analysis: This reveals how consistently an applicant has paid bills in the past.
• Debt-to-Income Ratio Assessment: This helps determine if an applicant has enough income to comfortably afford the rent.
• History of Bankruptcies, Foreclosures, or Evictions: These are serious red flags that indicate potential financial instability.
• Length of Credit History: A longer credit history generally provides a more comprehensive picture of an applicant's financial behavior.

Pros:

• Strong predictor of financial responsibility: Credit reports offer valuable insights into an applicant's financial habits.
• Provides objective data: Credit scores offer a standardized way to compare applicants.
• Can reveal patterns of financial behavior: Consistent late payments or high debt levels can indicate potential problems.
• Widely accepted standard: Credit checks are a common practice in the rental industry.
• May identify potential financial issues: Early identification of potential problems can save you time and money in the long run.

Cons:

• May disadvantage young renters with limited credit history: Those new to credit may not have enough history to generate a reliable score.
• Can penalize those recovering from past financial hardships: A past bankruptcy or foreclosure can negatively impact an applicant's score, even if their finances have improved.
• Doesn't account for cash-based income or alternative payment histories: Relying solely on credit reports can exclude otherwise qualified applicants.
• Requires tenant consent and may involve screening fees: Obtaining credit reports requires legal compliance and can incur costs.
• Can raise fair housing concerns if not applied consistently: It's crucial to apply the same credit criteria to all applicants to avoid discrimination.

Examples of Successful Implementation:

• Large property management companies like Greystar typically require minimum credit scores ranging from 600-650.
• Many independent landlords utilize services like TransUnion SmartMove to conduct comprehensive credit checks.
• Some affordable housing programs employ modified credit criteria that prioritize rent payment history over the overall credit score.

Tips for Using Credit History Checks Effectively:

• Consider the reasons behind poor credit: Don't automatically disqualify applicants with less-than-perfect credit. Explore the circumstances surrounding negative marks.
• Apply consistent criteria: Use the same standards for all applicants to comply with fair housing laws.
• Look for improvement trends: A positive trajectory in an applicant's credit history can signal improved financial stability.
• Consider higher security deposits: For borderline credit cases, a larger security deposit can mitigate risk.
• Be aware of local laws: Research and comply with local regulations regarding credit screening, as some cities (like Seattle) have specific restrictions.

Popularized By: TransUnion SmartMove, Experian RentBureau, Equifax, National Association of Realtors (NAR), and RentPrep screening services.

Credit history checks are an invaluable tool for tenant screening, providing objective data that helps landlords make informed decisions. By understanding the nuances of credit reports and applying consistent, fair practices, you can effectively mitigate risk and select reliable tenants for your properties. This careful approach contributes significantly to successful property management, ensuring long-term financial stability and minimizing potential problems.

2. Income Verification

Income verification is a crucial component of the tenant screening criteria process. It confirms that prospective tenants have sufficient and stable income to comfortably afford the rent. This step helps mitigate the risk of late payments, defaults, and ultimately, costly evictions. Landlords typically require tenants to demonstrate monthly income that is two to three times the monthly rent, a standard industry practice often referred to as the income-to-rent ratio. This ratio ensures tenants aren't financially overextended and can consistently meet their rental obligations. This protection benefits both the landlord and the tenant.

The income verification process involves several key features: establishing an income-to-rent ratio (typically 3:1), verification of employment status and history, assessing income stability, and requesting supporting documentation. This documentation often includes recent pay stubs, tax returns, and sometimes bank statements. By thoroughly examining these elements, property managers can gain a clearer picture of an applicant's financial health.

Pros:

• Directly addresses ability to pay rent: Provides a direct correlation between income and affordability.
• Reduces risk of late payments or defaults: Proactively minimizes potential financial losses.
• Objective measurement: Offers a consistent and unbiased evaluation method for all applicants.
• Protects both landlord and tenant: Safeguards both parties from financial strain.
• Multiple verification methods: Allows for flexibility in obtaining supporting evidence.

Cons:

• May not account for non-traditional income sources: Can disadvantage individuals with income from sources like investments, alimony, or gig work.
• Can disadvantage self-employed individuals or contractors: Traditional documentation may not accurately reflect their income.
• Doesn't consider existing financial obligations beyond rent: Fails to account for debt loads or other expenses.
• May exclude otherwise qualified tenants with irregular income: Can penalize individuals with seasonal or fluctuating income streams.
• Documentation can be cumbersome: Collecting and verifying documents can be time-consuming.

Examples of Successful Implementation:

• Large property management companies like Avalon Bay Communities typically require verifiable income of 2.5-3x the monthly rent, demonstrating a strong commitment to financial stability in their tenant base.
• Many property management companies accept co-signers for students or first-time renters who don't meet income requirements, offering a viable solution for those new to the rental market.
• Housing voucher programs like Section 8 use modified income verification processes, recognizing the unique circumstances of participants.

Tips for Effective Income Verification:

• Request multiple documents: Obtain at least two recent pay stubs and the previous year's tax returns.
• Directly verify employment: Contact employers to confirm employment status and income.
• Consider alternative income verification: For self-employed applicants, accept bank statements, contracts, or 1099s.
• Include all income sources: Account for all legitimate income streams, including alimony, investments, and side hustles.
• Be aware of local laws: Research and comply with local regulations regarding income requirements and maximum allowable ratios.

Income verification deserves a prominent place in the tenant screening criteria because it directly addresses the most critical aspect of tenancy: the ability to pay rent. For single-family property managers, property management companies, large rental portfolio owners, and tenant placement companies, ensuring financial stability among tenants is paramount to successful and profitable operations. Utilizing a robust income verification process helps protect investments, minimize financial risks, and foster positive landlord-tenant relationships. While traditional employment verification is standard, adapting to the evolving landscape of income sources is crucial for a comprehensive assessment. By incorporating these tips and understanding the nuances of income verification, property managers can make informed decisions that benefit both their business and their tenants.

3. Rental History and References

A thorough tenant screening process relies heavily on verifying an applicant's rental history and references. This crucial step involves contacting previous landlords to confirm tenancy details, including payment reliability, property maintenance, lease compliance, and overall behavior. This provides valuable insight into how the applicant has conducted themselves as a tenant in the past and helps predict their future behavior. This information paints a picture of the applicant’s responsibility and respect for their rental obligations, offering a glimpse into their potential as a future tenant.

Key features examined during rental history verification include the length of previous tenancies, on-time payment history, any history of lease violations, the condition of the property upon move-out, and, importantly, the previous landlord's willingness to rent to the applicant again. For property managers, this information is invaluable in assessing risk and making informed decisions. It allows you to identify potential red flags that might not be apparent in credit reports or background checks.

Pros of Checking Rental History and References:

• Real-world tenant behavior information: Provides a practical perspective on how an applicant behaves as a tenant, beyond credit scores and background information.
• Reveals patterns: Can uncover patterns of behavior, such as late rent payments or property damage, that might be missed by other screening methods.
• Identifies problematic tenants: Helps identify tenants who may appear qualified on paper but have a history of problematic behavior.
• Uncovers undisclosed information: Can reveal information about unauthorized occupants, pets, or other issues from previous rentals.
• Assesses communication and relationship management: Often reveals the applicant’s communication style and ability to maintain a positive landlord-tenant relationship.

Cons of Checking Rental History and References:

• Reliability of information: Previous landlords may not always be forthcoming or honest in their assessments. Some might provide overly positive references just to be rid of a problematic tenant.
• Challenges with first-time renters: Difficult to verify rental history for applicants with limited or no prior rental experience.
• Time-consuming process: Contacting and interviewing multiple previous landlords can be time-consuming.
• Lack of standardization: No universally standardized format exists for collecting and comparing rental history information.

Examples of Successful Implementation:

• Large property management companies like Camden Property Trust contact at least two previous landlords for each applicant as a standard practice.
• Many independent landlords utilize standardized reference check forms provided by organizations like the National Apartment Association to ensure consistency and thoroughness.
• Corporate housing providers, such as Furnished Quarters, often require a more extensive rental history (e.g., 5+ years) for their premium properties.

Actionable Tips for Effective Rental History Verification:

• Contact multiple landlords: Always contact previous landlords, not just the current one, to get a more comprehensive picture.
• Ask open-ended questions: Instead of relying on yes/no questions, ask open-ended questions that encourage detailed responses. For example, “Can you describe your experience with this tenant?”
• Verify landlord identity: Confirm that you're speaking with the actual property owner or authorized manager. Property ownership can be verified through public records.
• Standardize your process: Create a standardized form with consistent questions for all applicants to ensure fair and objective evaluations.
• Look for gaps: Be mindful of unexplained gaps in rental history, which might indicate undisclosed residences.

Why Rental History Matters:

Rental history and references are a critical component of tenant screening because they provide direct insight into an applicant’s past behavior as a renter. This information is invaluable for mitigating risk, protecting your property, and fostering a positive landlord-tenant relationship. While other screening methods, like credit checks and background checks, provide important financial and legal information, rental history reveals the human element—how an individual actually behaves as a tenant. For single-family property managers, property management companies, large rental portfolio owners, and tenant placement companies, this information is essential for making informed decisions and placing reliable tenants. Organizations like the American Apartment Owners Association (AAOA) and the National Association of Residential Property Managers (NARPM) advocate for thorough rental history verification as a best practice, and services like RentSpree and Buildium provide tools to streamline the process.

4. Criminal Background Check

A crucial element of comprehensive tenant screening criteria is the criminal background check. This process investigates an applicant's criminal history to assess potential risks to the property, other tenants, and the surrounding community. By examining county, state, and even federal records, landlords can identify convictions, pending cases, and sometimes arrests. It's important to remember that while security is paramount, landlords must carefully balance these concerns with fair housing laws designed to prevent discriminatory practices against protected classes. This requires a nuanced approach that considers both safety and fairness.

Criminal background checks offer various features that allow landlords to tailor their screening process. These include the scope of the search (county, state, national, or international), the lookback period (typically 7-10 years, though this is changing due to fair chance housing laws), and the types of offenses considered (violent crimes, property crimes, drug offenses, etc.). A key consideration is whether to include arrest records in addition to convictions, and the implementation of individualized assessments as recommended by HUD. This individualized assessment process allows applicants to provide context and mitigating circumstances surrounding their criminal history, promoting fairness and preventing blanket denials.

This background check deserves a place in any robust tenant screening criteria list due to its potential to significantly mitigate risk. The benefits are numerous: increased safety for residents and protection of property, reduced liability for negligent renting claims, and provision of objective data for risk assessment. Furthermore, requiring background checks may be stipulated by insurance companies or housing programs. Performing these checks demonstrates due diligence in tenant selection, a crucial aspect of professional property management.

However, implementing criminal background checks isn't without its challenges. Fair housing concerns arise if these checks are applied improperly, potentially leading to disparate impact against protected classes. National databases can contain errors or incomplete information, potentially leading to unfair decisions. Overly broad application of criminal background checks can perpetuate housing insecurity for individuals who have been rehabilitated, hindering their reintegration into society. Increasingly, local “ban the box” and fair chance housing laws are restricting the use of criminal history in tenant screening. This necessitates careful policy development and consistent application.

Examples of Successful Implementation: Some property management companies exclude applicants with violent felony or drug manufacturing convictions. Many housing authorities have adopted HUD's 2016 guidance on individualized assessments, which allows for a more nuanced and fair approach. However, local laws are evolving rapidly, as demonstrated by Seattle's Fair Chance Housing Ordinance, which significantly restricts the use of criminal background checks in tenant screening.

Actionable Tips for Landlords:

• Create a written policy: Clearly specify which offenses are disqualifying and the rationale behind those decisions.
• Consider context: Evaluate the nature, severity, and recency of offenses.
• Offer opportunities for explanation: Allow applicants to provide context and mitigating circumstances.
• Stay up-to-date: Remain current on local and federal fair housing guidance regarding criminal screening.
• Document everything: Maintain thorough records of the decision-making process, especially for rejected applicants.

By thoughtfully integrating criminal background checks into your tenant screening criteria and adhering to best practices and legal requirements, you can effectively balance safety and fairness, selecting responsible tenants while upholding fair housing principles. This approach protects your investment, fosters a positive community environment, and contributes to responsible property management.

5. Eviction History Screening

Eviction history screening is a crucial component of the tenant screening criteria process, offering valuable insights into an applicant's past rental behavior. This method involves scrutinizing court records for evidence of prior eviction filings, judgments, and forced removals. By examining these records, property managers can identify patterns of lease violations, non-payment of rent, or other problematic behaviors that resulted in formal eviction proceedings. As one of the strongest predictors of future rental issues, a thorough eviction history check is essential for mitigating risk and protecting your investment.

How it Works:

Eviction history screening involves searching unlawful detainer court records at the county level. These records can reveal eviction judgments and settlements, as well as dismissed or withdrawn eviction cases. Typically, the search covers a lookback period of 3-7 years, although this can vary. The search also includes money judgments associated with evictions, providing further context to the applicant's financial history. Features of comprehensive eviction screening include:

• Unlawful detainer court records search: This is the core of the process, examining court dockets for eviction filings.
• Eviction judgments and settlements: These indicate that a court ruled against the tenant or a settlement was reached.
• Dismissed or withdrawn eviction cases: While not as severe as judgments, these can still signal potential issues.
• Lookback period (typically 3-7 years): Focuses on recent history, although some states have limitations.
• Money judgments associated with evictions: Reveals outstanding debts related to past tenancies.

Why Use Eviction History Screening?

This screening criteria deserves a prominent place in your tenant screening process because it directly addresses the core of the landlord-tenant relationship: adherence to lease terms and timely rent payment. Credit reports, while valuable, may not always capture the full picture of an applicant's rental history. Eviction records provide a specific lens focused on past rental behavior, often uncovering lease violations beyond simple non-payment.

Pros:

• Strong predictor of future rental problems: Past evictions are a significant indicator of potential future issues.
• Directly relevant to landlord-tenant relationship: Provides insights specific to rental behavior.
• Records are usually public and verifiable: Ensures accuracy and transparency.
• Can reveal patterns not apparent in credit reports: Offers a unique perspective on an applicant's history.
• Often uncovers lease violations beyond non-payment: Highlights a broader range of potential problems.

Cons:

• Records may not distinguish between fault and no-fault evictions: Requires careful review and consideration.
• Database coverage varies by location (rural areas often underrepresented): Can limit the effectiveness in some regions.
• Can perpetuate housing instability for those with past hardships: Requires a balanced approach and consideration of circumstances.
• Some jurisdictions are limiting use of eviction records (particularly during COVID-19): Stay updated on local regulations.
• May not reflect when tenant prevailed in eviction dispute: Important to review the full details of any case.

Examples of Successful Implementation:

• Equity Residential, a large property management company, typically denies applicants with eviction judgments in the past 5 years.
• Some property managers consider eviction filings that were later dismissed on a case-by-case basis, allowing for more nuanced decision-making.
• New York's Housing Stability and Tenant Protection Act restricts the use of eviction history in screening, highlighting the evolving regulatory landscape.

Actionable Tips:

• Distinguish between eviction filings and actual judgments: An eviction filing doesn't automatically mean the tenant was at fault.
• Consider the circumstances of eviction (economic hardship vs. lease violations): Context is crucial for fair assessment.
• Be aware of COVID-19 eviction moratorium periods when evaluating recent history: Consider the impact of the pandemic on rental situations.
• Check multiple counties where applicant has lived: Ensure a comprehensive search.
• Verify information with previous landlords when possible: Direct contact can provide valuable insights.

Popularized By:

Services like MyRental eviction check service, E-Renter tenant screening, American Apartment Owners Association (AAOA), LexisNexis screening services, and Apartments.com tenant screening services have popularized and streamlined the process of eviction history screening. Leveraging these tools can significantly improve the efficiency and effectiveness of your tenant screening process.

6. Employment Verification: A Critical Tenant Screening Criteria

Employment verification is a crucial step in the tenant screening process for single-family property managers, property management companies, large rental portfolio owners, and tenant placement companies. It's a core tenant screening criteria because it confirms the information an applicant provides about their employment, going beyond simple income verification to assess long-term financial stability and the likelihood of consistent rent payments. This process investigates an applicant's job status, salary, position, and length of employment, offering a more comprehensive picture of their financial health.

How it Works:

Employment verification involves contacting an applicant's current employer to confirm the details they provided on their rental application. This includes verifying their current employment status (active, on leave, or terminated), length of employment with the current employer, job title and department, and, if possible, the probability of continued employment. This can be done directly by the landlord or through a third-party employment verification service. The depth of information obtained often depends on the employer's policies and what they are willing to disclose.

Features and Benefits:

• Verification of current employment status: Confirms the applicant is actively employed, on leave, or terminated.
• Length of employment: Provides insight into job stability and potential future earning power.
• Position and department information: Offers a more detailed understanding of the applicant's role and responsibilities.
• Probability of continued employment: Where possible, understanding if the applicant is on a probationary period, facing potential layoffs, or in a secure position.
• Direct employer contact vs. third-party verification: Offers flexibility based on resource availability and employer accessibility.

Pros:

• Confirms income stability: Goes beyond current earnings to assess the long-term reliability of the income source.
• Identifies potential future financial issues: Reveals potential red flags like impending layoffs or probationary periods.
• Verifies application information: Ensures accuracy and honesty in the application process.
• Reveals employment history patterns: Can highlight gaps or inconsistencies not evident in income documentation.
• Directly addresses income source reliability: Focuses on the primary source of income for rent payments.

Cons:

• Limited employer information: Many employers restrict the information they provide due to liability concerns.
• Not applicable for all: Difficult to use for self-employed individuals and contractors.
• Time-consuming process: Often requires multiple attempts to connect with the right person at the company.
• Privacy concerns: Applicants may have concerns about their privacy.
• Fair housing concerns: Care must be taken to avoid using obtained information in a discriminatory manner.

Examples of Successful Implementation:

• Lincoln Property Company: Uses automated employment verification through The Work Number.
• Many landlords: Require a Verification of Employment form completed by the applicant's HR department.
• Corporate housing providers: Often require direct verification from company HR.

Actionable Tips:

• Written authorization: Always obtain written authorization from the applicant before conducting employment verification.
• Main company numbers: Call the main company number rather than direct lines provided by the applicant.
• Third-party services: Consider using third-party verification services, especially for larger employers.
• Alternatives for self-employed: Develop alternative verification methods for self-employed applicants, such as reviewing tax returns or bank statements.
• Document everything: Keep records of all verification attempts and responses.

Why Employment Verification Deserves Its Place in Tenant Screening Criteria:

Employment verification is a critical component of a thorough tenant screening process because it directly addresses the reliability and stability of an applicant's primary income source. By verifying employment details, landlords can make more informed decisions, mitigate risk, and increase the likelihood of securing reliable, long-term tenants. While alternative income verification methods exist, employment verification remains a cornerstone for assessing financial stability and ensuring the tenant can meet their rent obligations.

Popularized By:

• The Work Number (Equifax service)
• Truework employment verification
• Rental Housing Association verification forms
• ZipRecruiter (for reference on employment verification practices)
• National Apartment Association (NAA) screening recommendations

Tenant Screening Criteria Comparison

Streamline Your Screening with Showdigs

Mastering the core tenant screening criteria—credit history, income verification, rental and employment history, criminal background checks, and eviction history—is paramount to securing dependable, long-term residents and protecting your investment. These checks form the foundation of a successful tenant placement strategy, minimizing risks and maximizing your potential for positive ROI. By thoroughly assessing applicants based on these factors, you significantly reduce the likelihood of late payments, property damage, and costly evictions.

However, efficiently navigating these essential tenant screening criteria can often be a complex and time-consuming undertaking. This is where Showdigs steps in. Showdigs streamlines your entire tenant screening process, automating key steps from application processing and comprehensive background checks to seamless communication and efficient showing scheduling. Leveraging AI-powered tools and dedicated agent support, Showdigs empowers property managers, large portfolio owners, and tenant placement companies to optimize their leasing operations, saving valuable time and resources. This allows you to focus on strategic growth and building a thriving rental business.

Ready to transform your tenant screening process and experience the difference? Showdigs simplifies how you apply these critical tenant screening criteria, ensuring you find the best renters quickly and efficiently. Visit Showdigs today to learn more and request a demo.