Tenant Screening Criteria Changes For Our Changing Times

by D. D. of ClearScreening.com

In the past couple of years, the real estate market has been turned upside down - experiencing a down turn in the economy, failed banking industry, and all-time high unemployment rate. All these factors have led to a massive foreclosure rate and high rental vacancy rate for landlords and property managers across the country. Our property management customers, who represent all 50 states, are experiencing an average 20% vacancy rate. With the major losses in jobs and a failing real estate market, there are large numbers of people unable to keep up with their bills.

Every landlord is looking for good, long-term tenants. These renters are still out there, but, in this current recession, may have fallen on hard times, lost their jobs, and been forced to start over. This does not necessarily mean that they will be bad tenants – determining that would require a deeper look at their credit report where you can see the payment patterns and when they started to fall behind. Tenant screening has been and is at the forefront of accepting new tenants both before and in this new economic environment. However, if landlords continue to use outdated screening criteria, they may have a difficult time filling their vacancies.

Previously formulated tenant screening criteria may be too strict to deal with the current economic climate. Adjusting your criteria to accept more of the items that you once declined may help you increase the amount of applicants you accept. For example, you can adjust the amount of late payments you will accept and/or remove foreclosures (which are currently at their highest rate) from things that will trigger a decline. If you previously declined persons with bankruptcies, you should consider that they can only file every 10 years, and that if the bankruptcy has been completed, their debts have been restructured or forgiven. Even late payments and collections may indicate that your applicant has been trying to avoid bankruptcy, while getting their credit back on track. However, it is always important to look at the report in detail to see if, in fact, the applicant has fallen on hard times or if there is a pattern of not paying their bills on time. In all cases, your criteria adjustments should reflect the economic conditions of your particular property and the area in which it is located.

Beyond looking deeper at your criteria and your applicants’ credit reports, other things can be done to find acceptable tenants. For example, add additional screening procedures to make the process more comprehensive - employment verification and residence verification could be a great way to supplement a credit and criminal report just by using the information you already obtain on your rental application. Check their employment references to verify your applicant’s current work situation and their monthly income to show they have stable employment and can afford the rent payment and other bills. Contact previous landlords to determine their payment patterns and any property care or lease violation issues. If they owned their home, check the mortgage payments on their credit report to see when they started making late payments – does it fall in line with the situation they’ve described?

While some applicants have recently fallen on hard times because of today’s harsh economy, you may encounter some renters that show irresponsible credit histories overall. We recommend that you thoroughly screen all new applicants in your search for acceptable tenants. Though we haven’t addressed them in this discussion, we also recommend criminal background checks on all applicants – criteria for those should be independent of the credit criteria described above. We hope our tips can help you to fill your vacancies and find great long-term tenants.

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