What differentiates Tellus tenant screening from other services? How comprehensive are the results? As a landlord, tenant screening is the first step toward protecting your investment. While there’s no magic formula to predict what will happen, having enough background information about a prospective tenant helps you make an informed decision. Here’s what you should look for in a screening report and what you get from Tellus.
What to Look For
Most landlords will look at a tenant’s credit score, which indicates how consistently an applicant has paid their debts on time. Your mortgage payment deadlines don’t change, so having late rent payments (or no payments at all) can put your rental business in serious danger.
In addition to credit score, a thorough screening should also look at an applicant’s finances, specifically their debt-to-income ratio. As a landlord, you want to know if your tenant is deep in debt—this could mean they choose to pay their creditors instead of you.
A landlord will also want to look at rental history, specifically how long this person has been a tenant, where they have rented in the past, and if they were ever evicted. Understanding their past rental history can give you an indication of their future behavior.
Landlords often check for criminal background. Each landlord has their own policies about accepting applicants with a record. Some landlords care more about recent history than past mistakes. For others, a felony is an automatic disqualification. While there are Federal laws prohibiting discrimination based on race, ethnicity, religion, disability, and family status, there are no laws prohibiting discrimination based on past felonies or criminal record. (If you’re a renter who knows something like this will come up on the background check, it’s best to be upfront with your landlord beforehand. Honesty will go a long way toward establishing trust.)
Lastly, a good tenant screening should verify employment and identification. Having a job with a high enough salary to pay the rent is one of the most basic requirements for renting, and smart landlords will want to ensure their applicants are not stretching beyond their means. The general rule is that an applicant’s income must be equal or greater than three times the rental amount. Also have applicants submit photo ID to verify their identity.
The Value of Third-party Screening
Let’s say you have an applicant bring you a credit report instead of undergoing a third-party screening. While the report may seem good, you unfortunately have no way of ensuring its authenticity, as applicants have been known to falsify credit reports. If you want the complete picture, it’s best to have your applicants undergo a third-party screening.
Having a free tenant screening service like Tellus ensures that the information you receive will be accurate. Tellus partners with Naborly to deliver comprehensive reports covering all areas mentioned above, so that you have all the information you need to make an informed decision.
To see just how thorough this screening service is, we'll look at a sample report from Naborly.
The Naborly Score
This is the number you see in the top left-hand corner, predicting how successful this tenancy will be based on the information contained in the report. Since the score is based on the unique characteristics of both the applicant and the rental property, an applicant applying to two different properties may not get the same score.
For example, if Unit A rents for $2000 a month and the landlord requires a credit score of 790, while Unit B rents for $1200 a month with a required credit score of 670, an applicant with a monthly income of $3000 and a 690 credit score would receive a higher Naborly score for Unit B than for Unit A.
The beauty of the Naborly score is it doesn’t “blacklist” tenants with lower income or recovering credit by giving them a permanent score that will follow them no matter where they apply. Instead, it looks for the best match between a tenant and a property.
This page summarizes the details found in the report and predicts whether or not this applicant is a good match for your property and your requirements.
The Key Risks section in the bottom left-hand corner highlights potential problem points. In the sample report, the applicant’s rent-to-income ratio constitutes a high risk for this property. We can also see that criminal records have been found.
The Financial Analysis section in the bottom right-hand corner shows the applicant’s credit score, total debt, and rent-to-income ratio. While the sample applicant’s credit score looks good, the rent-to-income ratio indicates this applicant may be unlikely to pay the rent based on her current income.
The Tenancy Outcomes section shows various risks associated with accepting this applicant based on their prior rental and payment history. It’s here where landlords can see the risks of late payments, property damage, evictions, or early vacancies. While this section is speculative, it is based on actual history and past patterns of behavior.
The Rental History Search gives you a record of the applicant’s rental history including previous addresses, eviction history, and whether or not they were tried in small claims court. If there any specifics recorded, they will be found under “Record Details.”
The Criminal Background Check pulls records from State, Federal, and County courts. It will also tell you if your applicant appears in the National Sex Offenders Registry or the FBI’s Most Wanted list.
The Credit Summary gives you the applicant’s credit score. The Public Records show if there were any bankruptcies, judgments, collections, or liens.
The Debt Summary shows the applicant’s total debt from credit cards, mortgages, medical bills, car loans, student loans, or other debts. This section also details the risk of fraud, and if there are any credit risks, such as the applicant owing too much money to other creditors.
Pages Five and Six
These pages contain a copy of your prospective tenant’s rental application. Landlords using Tellus have the option to send a personalized link through the app to invite prospective tenants to fill out a rental application through Naborly. A copy of their application responses is included so that you can see what they wrote and check how well it matches the records found in the screening.
Pages Seven and Eight
These pages contain employment and identity verification. You will receive a copy of your applicant’s ID as well as a written confirmation of your applicant's employment and salary.
A tenant screening gives you an applicant’s credit and background information, but what you do with this information is another story. There are Federal laws you must follow that prohibit discrimination. Tune in next week to learn more about these Fair Housing Laws and how you as a landlord can choose or deny applicants fairly and legally.
While screening isn’t guaranteed to eliminate problems, it helps you see a more complete picture and make smart decisions for your investment.
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