How to Spot Red Flags in a Tenant Screening Report

Tenant Screening Brookline MA

Screening tenants is an essential step in finding the most reliable tenants for your property. However, it’s not enough to just run a screening report – you should also be on the lookout for any potential red flags that hint an applicant may be a risk. The wrong tenant in a property can create significant losses that could take years to recover. With that in mind, here are some of the most important red flags you should be aware of:

  1. Eviction History
    An eviction within the past seven years is one of the largest red flags when it comes to tenant screening – particularly if the tenant has more than one. If the eviction occurred during 2020 but they look like a good applicant otherwise, it may be worth investigating further to find out if the eviction was related to circumstances around COVID-19. If you feel like you need more information, you can ask the applicant, as well as their previous landlord.

    Another thing to consider: in 2017, Equifax, Experian, and TransUnion removed 96% of all civil judgements, including evictions, from credit reports – so make to include a background check while screening applicants.
  1. Criminal Records
    A criminal record shouldn’t automatically disqualify an applicant – and depending on where your property is, there may be very specific rules about when you can actually use criminal records in your rental decision. When looking into your applicant’s criminal history, its important to keep in mind that not all crimes are equal. The guidelines from the Department of Housing and Urban Development (HUD) recommend landlords and property managers consider the nature of the crime and whether it has a direct impact on the safety of your residents. You should also consider how much time has passed since their conviction.
  1. Public Records
    Public records include things like bankruptcies, tax liens, and civil lawsuits. Tax liens and lawsuits increase your applicant’s liabilities, which may make it difficult to pay rent in the future. Keep in mind that since the three credit bureaus removed the majority of civil judgements and all tax liens from their records, a credit report will only show bankruptcy public records.
  1. Negative Credit History
    Credit scores are helpful to determine how well your applicant pays their loans on time, but it’s not enough to determine whether the applicant is low-risk. Instead, it’s best to look at their credit history trend. This can show you if the applicant has a history of making late payments – which can signal they’d likely pay their rent late as well.

    An applicant who’s missed multiple payments within the last 6 months is a red flag. With bills piling up, it’s likely going to be difficult to pay rent on time regularly. You should also keep an eye out for applicants who are severely delinquent. This would include being late on payments for 120 days or more, if the account was charged off, or if the applicant’s account was sent to collections. It’s also important to consider the type of account. For example, medical bills and student loans are typically less severe, while utility bills, unpaid rent, auto loans, or payday loans that were sent to a collection agency signify a more significant financial issue.
  1. High Debt to Income Ratio
    Another thing to consider is that just because an applicant has a good credit score doesn’t mean they’ll automatically be able to afford rent long-term. A credit score only shows an applicant’s total debt; it doesn’t verify or take their income into account in any way. Once you’ve asked for proof of income, you should take a look at their debt to credit ratio. Is their income high enough to pay the rent, along with their other financial obligations, and still have some income left over to live comfortably?

    Keep in mind that if they have a deferred student loan, the loan may have been put on pause because of financial concerns, but it also could be due to re-enrolling in school. Since student loans are only temporarily deferred, make sure to ask the applicant for more information on their repayment terms.
  1. Identity Verification
    An accurate background check starts with accurate information, so make sure you have the right name, date of birth, and social security number. Check for aliases, alternative social security numbers, multiple dates of birth, or other discrepancies that could invalidate the information you receive. It’s also a good idea to cross-reference the rental application with a government-issued ID, along with reviewing their previous address history to make sure everything matches.

The first step to making the best rental decision for your property starts with having the right information; the second step is to make sure you’re interpreting everything correctly. Our tenant screening services make it easy to ensure you’re working with the most accurate information possible. All services are available online 24/7 and we offer the ability to defer the cost of the reports to the applicant. In addition, we conduct tenant verifications on your behalf, saving you time and hassle. For more information on which tenant screening reports would be most beneficial for your properties, visit our services page or feel free to contact us at 800-523-2381.