A recent incident that came up in the screening of an applicant made me think to take a closer look at some of the considerations to bear in mind when one handles the tenant screening process themselves. With a multitude of tenant screening services to choose from on-line, how do you know how to differentiate between them and what is important to know about the process? Here are a few points to consider:
1. Name vs. Social Security Number
I had previously thought of a SSN as being a stronger identifier to someone than the first and last name. However, this isn’t necessarily the case when it comes to tenant screening, especially in regards to the criminal background. For a couple of reasons the SSN is not the most important factor in this regard. Most criminal charges are filed with the person’s name and not a SSN so it will likely not even be on any criminal/court documents. Also, since many of these documents are made public record it is generally not listed as that would put people’s SSN at risk. Therefore, when it comes to criminal background history, using a correct name and date of birth are more important than the SSN.
2. Speaking of names...
When it comes to names, it is particularly important to use as much of the name as possible including the middle name or at least middle initial, if available, as well as using a full hyphenated last name if applicable. Ideally, your best chance of uncovering important information will be if you use the name exactly as it appears on their state issued I.D. as this is the name as it would likely appear on any arrest or court documents. Also, the use of the middle name helps differentiate this individual from others who could possibly have the same first or last name.
3. Proofreading IS important!
If you think that whatever background screening service you use will pick up on any typos or inconsistencies in the data pieces you input, think again. Most companies use the information exactly as you input it on-line, so if there are any typos at all you are at risk of getting incomplete or incorrect data that is worthless. Take your time to MAKE SURE the data you input is consistent with that provided by your applicant as you don’t want to waste money on running a report and getting worthless data. This was part of the issue with the incident I encountered recently. The first screening I had done was done with a falsified name from the applicant. Once that was discovered I ran the screen again. The system automatically pre-filled all the blanks I was using as I started to input all of the same data; however, when it came to the date of birth it “pre-filled” the date by adding one day to the previously entered date of birth (subtle and not picked up on easily). Therefore, this second screen also provided inaccurate data as the date of birth was off by one day. If there had not been additional reasons that came up to make me look further I might have never realized the error and would have made a decision based on incorrect data.
4. “Instant” reports are not necessarily better.
In this day and age we are so accustomed to getting the information we want immediately at the push of a button. And many of the screening services available provide their data/reports nearly that fast. But is that really necessary and better? I have decided perhaps not. Why? Because the ones that provide “instant” reports are typically only searching data banks that can be automatically searched instantaneously by a computer and are not including information that might only be accessible by manual extraction by a human. Some states do not participate in reporting to certain data banks, so the only way to get relevant data in that case is by having a real person search the state records. It would be a bummer to realize after you have accepted a tenant that they did have a criminal record that would not have been acceptable to you but you realized it was because the records would have only been found by searching data manually instead of sourcing it from data banks. Naturally, this takes a little longer, but it is still possible to get this information within a day or so with a few companies and might just be worth the wait.
5. Evictions anyone?
When choosing from various screening services, make sure you realize whether you are choosing a service or package that includes the eviction history or that you have to pay extra for that. For many landlords, this is one of the most important things that landlords want to know about an applicant. In addition to whether it is included or not, find out how far back the eviction history is searching. Eviction history is reportable for a seven year period, so even if you are provided with history of eviction further back than seven years you cannot use this alone for grounds for not accepting an application without being in violation of fair housing laws.
6. Bankruptcy Data
As with evictions, bankruptcy has a window of time for which it is reportable and in this case is 10 years. Although reportable to data banks for the previous 10 years, certain screening services will give a shorter window of look-back time (say 8 years), so just know there might be additional data that you are not receiving if their look-back period does not match the reportable window.
7. Credit Report vs. Credit Check
Some landlords will insist on having the actual credit score of the applicant to make a decision versus just a “pass” or “fail” designation based on various criteria set for minimum credit standards. Only you can say which is necessary for your rentals, but just be aware there can be a difference in the information you are getting. Also, understand that in some cases, you can submit the data yourself and with other services the applicant interacts directly with the credit screening agency and you just receive a report afterward. Not that there is a right or wrong way to go here, but just to make you aware there are slight variations in what information you receive and whether or not it requires the applicant to take action on their part to get that information.
8. Can the applicant be charged for the screening fee?
Again, each service is different in this regard. Many of the services give you the option of paying for the background screening as the landlord or allowing it to be set up to allow the tenant to be required to pay for this charge. Most of the basic packages cost in the range of $20 - $35. One possible way to go about having the applicant have some skin in the game in this situation is by indicating to them that they will be required to pay for the fee up front but as long as they are accepted they will receive a credit for the charged amount on their first month’s rent. If they are not a serious applicant they might balk at paying this charge, but if they are serious and feel qualified they will understand this is a reasonable request and be happy with this arrangement.
9. Permission to Screen
To be in full compliance with screening applicants, make sure you have the applicant’s permission via a signed acknowledgement to run their background screening and credit check. Since you are accessing personal data on individuals you need to have this signed off on by the applicant. The easiest way to include this is simply by having it be a part of your rental application where it is included at the end of the application along with the applicant’s signature. Most rental application templates have this included, but just verify that it is indeed there whether you use a template or create your own application.
Going back to the incident that got me started on this topic, I ended up running a 3rd screen once I noticed the date of birth error and finally got relevant information back that resulted in that applicant not being approved as a tenant. It was annoying that it took 3 screens to feel like I obtained the information I set out for, but in the end it was a small price to pay to feel like I learned about some of the nuances that can make the difference in this important area.
What have you learned in your experience of screening rental applicants? I’m always looking to learn from others and also share my experiences in hopes that it will benefit someone else, so I’d love to hear what your experience has been and any pointers you have!
Meanwhile, happy investing!