Setting Up Your Tenant Screening Criteria

by D. D. of ClearScreening.com

Before any landlord begins to accept applications from prospective tenants, he/she should establish policies or guidelines for what will be acceptable in a new tenant. These policies should comply with Fair Housing Act regulations, the Fair Credit Reporting Act (FCRA), and your state and local laws. While criteria may vary from landlord to landlord and between one property and another, the criteria used for a particular period of screening for the same or similar units should be consistent. The criteria you establish should be used for every application that you screen to help safeguard you against claims of discrimination.

Your criteria can be based upon information from the application, tenant screening reports received through an outside service such as Clearscreening.com, or information received from reference contacts given to you by the applicant. The following is a list of possible elements to consider when creating your criteria:

• Rental Reference - Was your applicant a good tenant for a previous landlord? Were rent payments made on time? How long was the lease for and did your applicant fulfill the agreement with the previous landlord?
• Employment Information/Reference – Does your applicant show a steady work history? Does your applicant show enough income to afford the agreed upon rent amount, other outstanding bills (which you’ll be able to see on a credit report), payments for utilities, and other miscellaneous expenses?
• No Credit – Some applicants will not have credit, and may not have a file with the credit bureau. For these applicants, you’ll need to rely upon your other criteria to guide your decision. You may also choose to have special policies for applicants with no credit, such as asking for a greater deposit, a cosigner, or declining their application altogether.
• Late Payments – Does your applicant’s credit report show a pattern of late payments? If so, how long ago were these late payments, and have they since been able to catch back up? Does your applicant currently have an amount past due?
• Collections – Does your applicant have unpaid collections? Are any of them from apartment communities or other residential properties? Utilities? Note: Medical Collections are often not considered during the tenant screening process because of the possibility of insurance disputes.
• Foreclosures – Does the applicant show any foreclosures? How long ago did the foreclosure happen?
• Bankruptcies – Does the applicant have any Bankruptcies on their record? Which Chapter did they file? When was the case discharged/dismissed (Has it been finalized?)?
• Credit Score – Does the applicant’s credit score fall in an acceptable range?
• Evictions – Does the applicant’s credit report show any judgments from a rental property? Does his/her Evictions Report show any filed Forcible Detainer/Entry records?
• Criminal Record – Note: Check state and local laws for information regarding what offenses can be used as grounds for denying a rental application.

Once you have selected the reports you are going to use, you must be consistent and run the same reports on every applicant to stay compliant with Fair Housing Act regulations. Use the information from the reports, application, and any references in conjunction with your criteria to make an informed, unbiased decision on your applicant.

A good policy is to put a written copy of your criteria in with your rental application. This allows each prospective tenant to see what you’ll be looking for and may help weed out unqualified applicants and save you time and energy. You may also want to keep copies on hand to give out in case there are any questions when an applicant is not approved.

SAMPLE CRITERIA

Income:
An applicant must provide sufficient proof of income to afford the apartment after deducting all other payments and expenses

Credit History:
Negative accounts in excess of 50% of total outstanding debt (excluding Medical debts) are unacceptable. Any bankruptcy proceedings must be finalized prior to signing a lease. Any evictions are unacceptable.

Rental/Landlord History:
An applicant must provide positive landlord references for the previous 2 years to show they can make rent payments each month without demand.

Criminal Record:
A criminal report will be run on all persons 18 years of age and older who will occupy the apartment. Cause for the application to be rejected include any of the following:
-Assault and/or battery or any violent crimes to others
-Vandalism
-Any abuse to a child
-Illegal drug activity of any kind

Falsifying or Excluding Information:
If during the tenant screening process it is discovered the applicant has falsified any information or has not accurately completed the application to hide negative information, the application will be denied. If any negative information is discovered after the fact, the lease will be voided and the eviction process will begin.

Now that you know how to create a criteria and what factors are involved, you can put your tenant screening policies in place and start accepting rental applications. Be sure to take your time with each application and the relevant reports and references to make sure that you select the applicant that will be the best tenant for you.

*Please feel free to use/repost this article, but please be sure to link back to our website at http://www.clearscreening.com.

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