The tenant screening process is essential, but it can also be very time-consuming to conduct comprehensive tenant credit and background checks. As such, many landlords turn to tenant screening services for more expedient evaluations. Before you try it out for yourself, consider the pros and cons of tenant screening services.
How to Screen Tenants: Do You Need Tenant Screening Services?
Tenant screening is the process by which landlords or property managers evaluate prospective clients on their capacity to meet the lease agreement. Through this tenant verification and evaluation process, landlords can double-check the information listed on a prospective tenant’s rental application form to see if it is true and accurate.
Why Do You Need a Background Check for Renters?
A tenant background check can tell you whether a prospect has the capacity to pay rent on time, follow tenant rules and regulations, and take care of your rental property. Here are the standard items included in a tenant screening report and why they are important.
- Copy of ID: Each applicant submits this for identity verification.
- Income: A tenant’s income must be able to cover monthly rent payments. Most landlords require tenants to have a 3:1 income-to-rent ratio or rent should be 30% of gross income.
- Employment History: A landlord should check if a tenant has a stable employment history. This ensures that a tenant has a steady source of income for rent payments. It’s important to also ask for their current employer, job description, and employment references.
- Credit Report: A tenant credit check is a crucial part of the screening process. You may decide to accept or deny an applicant based on their credit score. If their credit score is not strong enough (below 650), landlords may decide to ask for a higher security deposit or require a cosigner for the lease agreement.
- Criminal Background Check: A tenant background check also checks if an applicant has a criminal record. While landlords must not have discriminatory screening practices, knowing an applicant’s criminal history can tell you about their ability to pay rent on time or whether they might pose a security risk for your building or other tenants.
- Rental History: The screening process helps determine how an applicant will be as a tenant in your property. As such, it’s important to look at their rental history. One of the most important things to look for is previous evictions. A tenant who has been evicted once may have a higher risk of being evicted again.
- Landlord References: Talking to an applicant’s previous landlord can reveal a lot of useful information such as late payments, lease violations, complaints from other tenants, and cases of property damage.
Pros of Tenant Screening Services
Landlords know the importance of conducting comprehensive tenant background searches. However, this screening process can be very tedious and time-consuming, especially if you are evaluating a lot of applicants. Here are the pros of tenant screening services for landlords:
Quick and Convenient
A tenant screening service can deliver your results in a matter of minutes. You’ll get the information you need to properly assess the background and financial capability of a potential tenant. It’s also very convenient as everything is done online. Landlords just have to enter the details and they’ll get a report within minutes.
More Efficient Tenant Screening
With a tenant screening service, landlords can approve or deny applications at a much faster rate. As you’re able to screen more applicants, you have a much better chance of finding quality tenants and avoiding bad tenants.
Consistent Screening Process
A tenant screening service uses the same procedure for evaluating your applicants. As such, when you deny applicants, they won’t be able to accuse you of employing screening practices that are discriminatory or go against the Fair Housing Act.
Most tenant screening services offer bundles or charge on a per report basis. This is more cost-effective than a subscription-based service. Some also offer different tiers or packages based on the extent of the background check. Landlords won’t have to spend more than they have to. Just keep in mind that you’ll also get what you pay for.
Cons of Tenant Screening Services
When deciding on a professional tenant evaluation provider, here are some potential risks to consider.
Higher Risk for Errors and Inaccuracies
While instant tenant screening reports are convenient, there’s a potential disadvantage to it as well. In order to deliver quick results, tenant screening services use automated programs to compile information about your prospective tenants. Most databases have errors that automated programs cannot detect. As such, there’s potential for your tenant screening report to have errors or inaccuracies, especially since there’s no one to double-check your report.
Lack of Personal Touch or Qualitative Data
Another potential issue with tenant screening services is that there is a lack of personal touch. Since a machine is compiling the data, it may miss out on qualitative data that would be easily discovered with a hand-compiled report. For instance, an automated report can tell you how many evictions a tenant has had, but it may not tell you why these evictions happened.
A lot of tenant screening services have tenant involvement. The service uses an applicant’s email address to obtain and verify personal information. However, not all tenants will complete these requests. There are many reasons: laziness, lack of time, or in some cases, they won’t even see the email request. If the applicants don’t complete the process, you won’t get your report.
Issues with FCRA Compliance
The Fair Credit Reporting Act (FCRA) aims to protect the rights of prospective tenants, particularly when it comes to using their private information for a background check. They have a right to dispute inaccurate, incomplete, and unverifiable information that may be included in a tenant screening report. If a tenant screening service is not transparent with its practices, you cannot be sure if they are complying with the FCRA or not. If there are compliance issues, you could end up being reported or sued by your applicants.
Lack of Customer Support
A lot of tenant screening services do not offer customer support. Even if they do, the level of service might be questionable at best. As a result, landlords may have a hard time following up on the information contained in a tenant screening report. If you are left with lingering questions, you may end up with issues with prospective tenants including disputes and compliance issues.
Is There an Alternative to Tenant Screening Services?
For landlords who simply have no time to perform comprehensive background checks, a tenant screening service is the best alternative. However, it’s important to remember that not all tenant screening services are the same. For instance, you cannot really expect much from free tenant screening services or those that charge a very low price.
In order to protect yourself from potential liabilities, make sure to choose the best tenant screening services. Practice due diligence when searching for a tenant screening service. Learn about how they perform background checks and what information will be included in the tenant screening report. You may end up paying a higher price, but you have better peace of mind knowing that the tenant screening report is accurate.
On the other hand, if you want a more personal tenant screening process, you can also consider partnering with a property management company. They will have the expertise to conduct a thorough background check. If they won’t do it personally, they will still have a network of the best tenant screening services. With this option, landlords can be confident with the quality and content of their tenant screening reports. A property manager can also be invaluable when it comes to the day-to-day operations of your rental property.
Tenant Screening Services Can Make Landlords’ Lives Easier
Landlords should take the time to find the best tenant screening service. If a tenant screening service leaves you with more doubts and questions, It’s probably not worth it. Make sure that you find a reputable company so that you can enjoy all the benefits and not have to worry about the potential risks or issues mentioned in this article.
If you need help finding tenant screening services in your area, feel free to browse the Rental Choice online directory. You can find top-rated property management companies that can guide you through the entire tenant screening process.
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