If you’re looking to find a great tenant, you’ve likely figured out by now that you need a thorough screening process to do the job. Maybe you’ve also figured out that screenings can be a bit, shall we say, complex.
It's true that there’s a slight learning curve when it comes to vetting potential renters. That’s why we put together this guide, to help you navigate each step of the tenant screening process so you can successfully land the perfect tenant.
As you might be anywhere in the tenant screening process, feel free to skip ahead as needed. We also recommend bookmarking this guide for future reference.
What’s In this Guide?
- The “What” and “Why” of Tenant Screening
- Tenant Screening 101
- How to Screen Tenants
- Verifying Tenant Details
- How to Call References
- What to Ask Previous Landlords
- Reading a Background Check
- Declining an Applicant
- Free Tenant Screening Checklist
- What to Look for in a Tenant Screening Service
- FAQs
The “What” and “Why” of Tenant Screening
Tenant screening is a process that provides the details a landlord or property manager needs to choose an eligible tenant for a rental. If you’ve listed your property and have already received applications, you can start the process of screening applicants based on your rental criteria to see if they’re the best fit. Having a straightforward tenant check can help you eliminate unqualified renters and even deter scammers, saving time and money in the long run.
Similar to the employment hiring process, the tenant screening process gives you a chance to find a tenant with the necessary skills needed to provide a positive renter experience. A person who has a history of paying their rent on time, obeying laws, and holding a steady job will likely be more reliable compared to someone with a history of late notices and criminal charges.
And while it may seem like a lot of work initially, know that having a solid screening process in place will make the whole thing more enjoyable and simpler to navigate.
Read similar: What is Tenant Screening? A Rental Application Guide for Landlords
Tenant Screening 101
Got an application or two for your rental? Yay! Now it’s time to conduct a screening to determine if they are the right candidate. Before you start, make sure that you get to know the Fair Credit Reporting Act, Fair Housing laws, as well as your local and state laws. These regulations may impact your overall process.
Understanding these laws will help you remain compliant and protect you from legal repercussion.
What are Fair housing laws?
Fair housing laws are regulations made by the U.S. Department of Housing and Urban Development (HUD). These rules are designed to ensure that everyone has the ability to find a home to inhabit without being discriminated against. This means that you cannot decline any eligible applicant based on their race or color, nationality, religion, gender, sexual orientation, familial status, or disability.
What is the Fair Credit Reporting Act?
When you apply for a credit card, purchase a mortgage, or rent an apartment, the companies taking your application will usually request a copy of your credit report from at least one of the three national credit bureaus (EquiFax, TransUnion, and Experian).
The Fair Credit Reporting Act (FCRA) requires anyone using a consumer report, such as a lender, insurer, landlord, or employer, to have legal permission to obtain a report.
As a landlord or property manager, you’ll likely want to request a copy of your tenant’s credit report through the credit bureaus, so make sure you do the following:
- Get written permission to obtain a copy of their credit report during the application process.
- If you deny an applicant due to their credit history, you must tell the applicant the reason for the denial as well as provide the name, address, and phone number of the credit bureau with the information.
How to Screen Tenants
The process is fairly simple. First, determine your rental criteria, then request a rental application, check criminal and financial history, call their references, and then meet with them in person or over the phone. We’ll go over each step more in detail and provide helpful links for each step below.
Set Rental Criteria
It’s a good idea to decide ahead of time your minimum requirements for your applicants. Will you require specific income requirements? Is your rental smoking or non smoking? Will you allow pets and if so, what kind and how many? List all of your criteria out.
If you need help determining your rental criteria, check out our two-part guide on establishing tenant screening policies.
Request a rental application
Next, request a rental application from your potential tenant. This is where you can ask for specific details about the applicant so that you can make an informed decision. Here are some examples of the questions you may want to include on the application:
- Employment information
- Length of time at current job as well as employment history
- Total household income
- Rental history
- References including landlords, employers, etc.
- Personal references
- Any outstanding debt payments
- Details about other household members such as roommates, pets, family members, etc.
Run a Background Check
After you’ve gathered all the details about your applicant, you can then run a background and credit check. This may involve using a third-party service that will run a report on an applicant’s credit history, search criminal records, verify employment, and look for eviction history.
Call References
If you’ve reviewed their screening report and determined that they are a good match so far, you can then call their references and current employer to gauge their overall character. This can also be a good time to gather additional information not included in their background check or application.
Meet with Applicant
If you’ve made it this far with your current applicant, the last step is to meet with them and do a formal interview. You can do this over the phone or in person. You may also want to take this time to show the rental if it’s unoccupied. You’ll also want to take this time to review the following:
- Go over the information on their application to gather any missing details
- Talk with the tenant and discuss any discrepancies
- Give the tenant details about the rental including how to pay rent, utilities available, policies, etc.
When you’ve made your decision, you can send over your lease agreement and get them ready for move in.
Verifying a Tenant’s Details
Part of having a successful tenant screening is knowing how to verify the information you’re provided, which includes learning how to check rental history. This will ensure that the applicant can make the rent payments, show responsibility and that the applicant is who they say they are.
You’ll want to began verifying their information when you receive a completed application. As many tenants tend to go apartment hunting around the time they need to move out of their current home, you’ll want to go through this process as quickly as possible.
There are third-party verification companies you can use if you’d like a do-it-yourself approach, or you can let a property management software do the tenant screening for you.
Tip: The advantage of property management platforms, like TenantCloud, is that they’ll often allow you to accept rental applications through your account and automatically run a background check and credit report, maintaining all your application details in one easy to find place.
When you receive the background report, you can then compare the details in the report to the details in their application, as well as call their employer and previous landlords to verify their address and current employment.
How to Call a Tenant’s References
Do a quick search in your internet browser to look up the companies listed on the application or use a business directory. Another good source for employee/employer information is LinkedIn.com. You’ll want to verify that the tenant was an employee at the times they listed on the application. Many companies list their business phone number and email on their website. Whether you reach out to them via email or phone number may depend on the information they provide on their website. Make sure to explain that the person you’re calling about is applying to be a tenant in your rental and you’d like to verify their employment history.
Other questions you may want to ask include:
- What does the tenant do for the company?
- Is the salary listed in their application the correct amount?
- Are they responsible as an employee?
If you do not receive a response or the company is unable to provide any information about their employee, reach out to the next employers and references on their list. You can also ask the applicant to provide a pay stub or current W2 tax form as proof of employment.
What to Ask Previous Landlords
As you’re reaching out to previous employers and references, make sure to include landlord references on your application, too. This can include their current landlord as well as any previous landlords. These contacts can provide a good frame of reference on how the tenant has previously treated other properties.
If you need some guidelines on what to ask other landlords, we’ve gathered the most common questions to ask:
- Did the tenant stay at the property during the time listed on the application?
- Did the tenant pay their rent on time?
- Were there any late or missed payments?
- Did the tenant provide notice before moving out of the property?
- Was the rental property left in good condition?
- Did you have any issues with the tenant?
- Would you re-rent to this tenant?
Remember, if there are no previous landlord listed or the tenant has not rented a property before, you can gather details in their credit report to make your decision.
Reading a Background Check
Getting to know your applicant’s background details is essential to making the right decision. When you first receive the results, you might be confused at how to interpret them. Here is what to look for:
- If terms like “derogatory” show up regarding payment status, the tenant may have late or delinquent payments. This can be a red flag for your applicant, depending on your criteria.
- A recurring payment may show up as “revolving,” meaning the tenant currently has a carry over or minimum monthly payment on their credit card. This can be a yellow flag and something to consider while evaluating their overall financial criteria.
- Any student loans or fixed payments may report as “installments.” Similar as above, this may be a yellow flag, but again depends on your overall criteria. Many renters carry student loans and credit card debt and are still able to pay their rent on time and show other financial responsibilities.
- Review the tenant’s credit score to determine if they tell a positive financial story. This is usually done with consistent, timely payments. It’s important to note that not all rent payments or utility payments will show up on a credit report, so a credit score should be considered with the rest of their financial information. You may want to set a minimum threshold credit score in your criteria if you prefer only tenants with a good credit score.
- Verify their employment, identity, and income details. Do they match what’s reported on the application? And do these details fit within your criteria?
- Look for public records, evictions, and any accounts that went into collection. If the applicant does not have a criminal record, it will show as not available.
Declining an Applicant
If you decide to turn down an applicant because of their background check, you can politely decline their offer through phone call, text, or email. It’s important to note that if you decline a tenant due to their credit details, you must notify them with an adverse action letter, according to the FCRA and the Federal Trade Commission (FTC).
An adverse action letter is a formal letter that must include the following:
- Name, address, and phone number of the credit reporting agency
- Contact details of the credit reporting agency
- Statement that the credit reporting agency didn’t make the adverse decision and can’t explain why the decision was made
- Notice of the consumer's right to a free copy of their credit report if requested within 60 days
- Notice of their right to dispute the accuracy or completeness of any information provided by the credit reporting agency
- the consumer’s credit score, if a score was used
What to Look for in a Tenant Screening Service
You’d think there would be one or two major tenant screening services out there, but no, there’s like… a bazillion. Or something around that number. These services are also known as consumer reporting agencies (CRAs), and they are designed to gather the data found on a person’s background history. This can include bankruptcies, liens, credit reports, criminal details, evictions, and employment history.
Which brings good news and bad news. The good news? They’re easy to find. The bad news? It’s not always simple to know which one will suit your needs best. Here’s what to look for in a screening service:
- Ease of Use: Find a service that is simple and easy to navigate, has good reviews, and reliable customer support.
- Legal compliance: Make sure to choose a reputable service that adheres to fair housing laws.
- Quality over speed: Look for a service that is thorough and detailed over one that promises instant turnaround. You want comprehensive data from the major credit bureaus, as well as national registries, criminal databases, and state and local records.
- Income verification: Not all background checks include income verification, and this can be an easy way to ensure that your applicant has the income means to make the rental payments.
- Integrated approach: Finding a service that integrates with the application process can make it easier to pre-screen and assign rental fees, helping you reduce out of pocket costs. One example is a property management software, where screenings and background checks can all be found in one easy place.
Frequently Asked Questions
What steps should a landlord take to screen a potential tenant?
The process of screening tenants begins with establishing rental criteria, receiving a rental application, conducting a background check, reaching out to references, and arranging a face-to-face meeting or phone call.
How can landlords conduct background and credit checks legally?
Landlords can conduct background checks legally by obtaining written consent from the prospective tenant, following the guidelines of the Fair Credit Reporting Act (FCRA), using a reputable screening service, and ensuring that the same criteria and process are applied consistently to all applicants. It is important to stay compliant with federal and state laws regarding tenant screening to avoid any legal issues.
What criteria should landlords use to evaluate a rental application?
Landlords should use a variety of criteria to evaluate a rental application, including:
1. Utilize tenant screening services to check for credit reports, criminal records, and eviction history.
2. Confirm that the applicant has a stable income to afford the rent.
3. Check the applicant's previous rental history to see if they were reliable tenants.
4. Assess the applicant's credit score and credit history to gauge their financial responsibility.
5. Verify the applicant's employment status and stability.
6. Gather relevant personal information including references and identification.
7. Conduct a thorough background check to ensure the applicant meets the requirements for tenancy.
By considering all these criteria, landlords can make informed decisions when evaluating rental applications.
How can landlords avoid discrimination during the screening process?
To prevent discrimination during tenant screening, landlords should use fair and consistent criteria, avoid bias, comply with fair housing laws, and maintain transparency in the process.
