Whether you’re a landlord or a property manager finding a great tenant is an investment. It’s a decision that will have a direct impact on your cash flow. The unit your tenant occupies and the property that they have access to are yours — they’re valuable resources. You should definitely want to protect them.
That said, one of the best ways to ensure that you find a great and trustworthy tenant is to perform a thorough tenant screening on all applicants. However, you need to know what to look for, sometimes potential drawbacks aren’t as easy to spot as you’d imagine. Here’s everything you need to know about potential red flags on tenant screening reports.
What is Tenant Screening?
Tenant screening is the process by which landlords or property managers evaluate prospective renters prior to signing any legally binding lease agreements. It’s an important procedure that should be on every landlord or property manager’s checklist. On the rental application, you can collect personal information about the tenant with which you can use to assess their rental history.
The information on your screening report will be revealing. By examining their past record of renting on a tenant screening report, you can glean important information including:
- Their history of paying rent on time
- Any infractions reported by previous landlords.
- Past evictions
- Criminal history
This is important because past behavior can dictate future success. By reviewing the screening report, you can predict whether your relationship with the tenant will be successful— or not.
Red Flags to Look for on Tenant Screening Reports & Applications
When you’ve obtained a tenant screening report, you may be presented with a lot of information! Focusing on specific red flags can help you can sift through the information without getting overwhelmed. Here are ten common red flags to look for when evaluating prospective tenants during your apartment screening:
A past eviction on a tenant’s record may demonstrate a history of being unable to pay rent or breaching a lease agreement. It could also tell you about the tenant’s ability to form a positive landlord-tenant relationship.
Either way, it could be an indicator of the tenant’s future in your building—definitely something to keep an eye out for on a screening report. If you see a past eviction on a prospect’s report, be sure to contact that landlord to get the full story.
2. Poor Credit
Credit scores reflect a person’s history of being able to pay bills on time and handle their finances with care. An individual’s credit score incorporates many different kinds of bills and debts.
If a prospective tenant has less than stellar credit (Sub 680 FICO score), you’ll want to have extra guarantees that they will pay rent on time. Most landlords set a minimum credit score for applicants. Remember, you can be as selective as you want, especially in hot markets.
3. Criminal Record
A potential tenant’s criminal record may have less to do with their ability to pay rent on time and more to do with how you think they’ll take care of your property or whether they would be a threat to other tenants. When viewing a criminal record, you’ll want to consider what the offense was, whether the individual was convicted, and how long it’s been since the crime occurred.
It’s discriminatory and illegal to have blanket policy declining any and all applicants with a criminal record, so be sure to only turn down tenants who have convictions that will impact their ability to be a good tenant.
Your screening policy should also screen ALL tenants for a criminal background to avoid discrimination. Screening certain tenants for criminal history and not others can be construed as discrimination.
4. No Employment or Scattered Employment History
When you’re renting to a tenant, one of your fundamental concerns should be whether you’ll be able to collect rent regularly. If your potential tenant does not have a consistent source of income, your future rent may be in jeopardy.
If their employment record gives you pause, you may want to consider other tenants who meet the common rule of thumb where tenants should be able to comfortably afford to spend up to 30% of their income on rent or 40x the monthly rent.
5. Unwilling to Have a Tenant Screening Performed
Tenant screening reports aren’t mandatory, but they are a very expected part of lease agreements in modernity. As even poor credit or criminal history could potentially be explained, it’s not a good sign if your prospective tenant has something they very obviously wish to hide. If the tenant doesn’t wish to have a tenant screening report performed, this could be a reason for concern.
6. Poor Landlord References
Unless this is the first time that your prospective tenant is renting, they should be able to provide you with the contact information of previous landlords. This can be the easiest and most reliable way to learn about the tenant’s past. If the previous landlords paint a less-than-flattering picture, don’t expect the prospective tenant to have turned over a new leaf.
7. Scattered Rental History
A potential tenant may have a great reason for moving around so much, especially if they are service members or students. However, if they don’t have a valid excuse, this can indicate poor landlord-tenant relationships. You might be in for a quick lease yourself. If you’re looking for something more long-term, this is something you’ll want to watch out for.
8. Tax Liens
A tax lien is a claim from the government on the property of someone who hasn’t paid the requisite taxes. This can paint a worrisome picture on a screening report. Your prospective tenant should be able to pay bills on time. A tax lein is a red flag that indicates outstanding payments and an inability to pay in a timely manner.
9. No Verifiable Income
It’s simple, any prospective tenant will need money to pay their rent. With the rise of the gig economy and freelance work using paystubs as proof of income is no longer a given. However, that doesn’t mean that you should just accept anyone.
A prospective tenant must have verifiable income, meaning that they can prove they can pay rent. Income needs to verified through pay stubs, bank statements, or proof of gainful employment.
You should always ask for a letter of employment stating their salary, start date and a contact person’s name. You may also ask for a Certified Public Accountant letter verifying their income for the last two years.
10. Lifestyle That Suggests They Will Break the Lease Agreement
This point is a little more nuanced and requires experience. If you notice evidence on a screening report of habits or hobbies which may:
- Damage your property
- Cause the renter to move away at a moment’s notice
- Invoke legal consequences
Consider that a potential warning up-front that you may want to listen to. If you prohibit smoking or pets in the unit, then anyone who is visibly smoking cigarettes shouldn’t be moved forward.
Ultimately, it’s your choice whether you want to spend the time to go through tenant screening reports prior to signing a lease with a tenant.
However, you can likely save yourself some headaches (and a lot of money in legal fees!) by using these reports to help weed out potential clients who may end up being headaches later on.
Evaluating screening reports is the most valuable tools you have throughout your career of being a successful landlord.