Landlords rely more on rental screening these days than ever – and a legal credit tenant screening service has to be a key component of any property manager’s arsenal. Congress has acted to strongly reign in the ability of banks and creditors (such as landlords) to react to debtors or clients/tenants who refuse to pay or are unable to pay. Given the number of people in foreclosure and or collecting unemployment these days the number of applicants with a checkered past is going to increase dramatically in the next couple of years.
How are today’s creditors supposed to react to the sudden drop in credit-worthiness of essentially the entire middle class? How are landlords and banks supposed to weed out the good clients from the bad? The answer is boils down to getting the facts and carefully evaluating prospective clients and renters with extra scrutiny. You don’t want to be excluding potential good tenants from signing a lease because they happened to fall on hard times but at the same time you have to protect yourself and your business.
Know the FCRA Law Before You Begin Your Investigation
The aforementioned law mentioned above is an extension of the earlier laws adopted under the Fair Credit Reporting Act (FCRA). Now the FCRA still governs the policies and practices in establishing or denying credit to rental clients or customers, but knowing how to apply it has become more important than ever because laws regarding taking action against deadbeats have tightened. It will very quickly become extremely difficult for property managers and other lenders to use old techniques like interest penalties and late fees to punish slow or non-payers. Further it will become more difficult to act to reduce risk of non-payment by adding prohibitive clauses in certain contracts.
How Then to Do Rental Screening When Information Is Incomplete or Suspect?
So you have a commercial property and are desperate for clients – but how do you fill a vacant unit when your potential rental clients are preying on your desperation? What do I mean by this? I mean they prey on your weakness by leaving information off the application – or give inaccurate referral information in hopes that you won’t check the facts thoroughly. In other words they are bluffing you in the hopes your obviously weakened hand will force you to take them in quickly. How do you fight back when you have a weak hand? The answer is you still have to do the rental screening process.
The Rental Screening Process
1. Get the rental application
2. Get the form authorizing a complete credit and background check
3. Verify the information on the form (particularly personal and employer references) – use a cheap basic directory search to verify phone numbers of references given and make sure the information you were given is correct.
4. Call the references and verify information provided by the applicant
5. Rate the applications based on the results of the reference calls
6. Take the top two rated applicants and perform an credit tenant screening credit (read the FCRA law – sample reports are at the bottom of the report)
7. Based on the results of the rental screening process choose the best applicant and bring them in for an interview
Using this disciplined process will help take the emotion out of bringing in and selecting tenants. This will go a long way toward reducing the number of mistakes made in the rental screening process and hopefully improve your real estate ROI.
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