Tenant screening can be the difference between a successful rental property and a bad one. In fact, just one eviction alone can cost a landlord an average of $3,5001, so after going through the process of getting a rental space fixed up and converted into a suitable environment for a tenant, the thought of turning those keys to such an important investment over to a complete stranger must be given its due. It’s also why so many tenant screening resources exist — to inform landlords about the folks they plan to let into their investment properties.
With that, let’s explore the best tenant background check services available and how to perform tenant screening yourself.
Table of Contents
- How Does Tenant Screening Work?
- Can I Do My Own Tenant Screening?
- Tenant Screening Services (7)
- Other Tenant Background Check Options
Tenant screening is not a standardized process. Different companies offer different solutions to landlords looking to make sure prospective tenants can be trusted. Most of those solutions fall into two categories: background checks and credit checks.2 The credit check ensures that a prospective renter has a good history with money, and is more likely to be able to make monthly rent payments. The background check looks into the renter’s past for red flags like prior evictions, sex assault convictions, or anything else that might make the renter a less attractive client.
According to some experts, tenant screening actually comes fairly late in the tenant acquisition process. Rentprep.com has an excellent online course that begins with 20 questions to ask prospective tenants.3 The course advises landlords to go through the Q&A process to really get to know a tenant before going through the tenant screening process. A 10-minute phone call can save a lot of time and money for both parties if the match doesn’t make sense.
It is absolutely within your rights as a landlord to screen potential applicants yourself.
That being said, there are numerous laws that protect clients from being discriminated against because of certain characteristics. The most important of these, the Fair Housing Act, made it illegal to discriminate against potential renters on the basis of seven characteristics:
- familial status;
- ethnic origin; or
- mental/physical disability4
Landlords who plan to do their own tenant screening should be up on the law to make sure they don’t inadvertently cost themselves tens of thousands of dollars for unwittingly running afoul of discrimination laws.
In addition to federal housing laws, there are also state laws regarding tenant screening that differ from state to state, so anyone who is planning on tackling this task should also look up the laws for their state on a site like this one.5 The U.S. Department of Housing and Urban Development also has a website broken down state by state to provide rent help to landlords looking for further answers.6
Credit scores are an indicator of trustworthiness but don’t necessarily paint a full picture of the tenant in question. Many landlords choose to require a minimum credit score, especially if they own multiple units. However, evaluating each tenant on a case-by-case basis is still common.
There isn’t any single magic number for prospective tenants, but 670 is widely considered an acceptable credit score for renters. Keep in mind that some tenants haven’t had the opportunity to boost their credit score with the help of mortgage payments or other credit-raising avenues similar to homeownership. Generally, scores of 620 or lower get into the risky territory, but a few missed late payments may be able to be explained by the tenant.
MyRental compiles all your basic background check information about a prospective tenant — everything from credit scores to rental history — and creates their SafeRent Score. Cross-referenced with public, contributory and proprietary data, the single score distills applicants down to a grade of tenant favorability.
In layman’s terms, they hand out a single grade meant to predict whether or not an applicant is likely to be a good tenant, including how long they’re likely to stay in your unit and how likely they are to pay rent on time each month. Further, they allow you to sort all applicants by their given scores by order of how high or low they grade.
The service is free for submitting applications and basic screening packages start at $24.99.
The American Apartment Owners Association has a large membership and a list of benefits their members receive. According to their own website, tenant screening services are their most relied upon service, which they’ve directed toward offering reports on applicants as fast as possible. For members operating large properties or even those who manage several properties and have high turnaround/applicant volume, AAOA’s tenant screening services can be an efficient option. Their credit reports and background checks can be done through an automated system, which allows for 24/7 service and instant responses.
Rentprep is a company that works directly with groups like The Professional Background Screening Association, Concerned CRAs, National Apartment Association and Transunion to help landlords with their screening services.
Outside of actually conducting screening services, their network provides resources like a blog and even a podcast geared toward topics relevant to property management, and even a Facebook page to connect clients. Their resources are certainly useful for newer property managers and newer landlords who may be learning the ropes, per se.
While most background checks are conducted and paid for on an individual basis — all starting at $18.95 — RentPrep does offer special packages and services specifically for members that manage 50 units and above.
Experian’s services are centered around the company’s position as a credit reporting specialist. For tenant screening, they offer landlords the resources to view credit rating and a range of scores, employer and home address history, active credit accounts and their payment history, as well as any possibly negative public records like foreclosures, evictions, bankruptcies, or liens.
Similar to MyRental’s system, Rentspree compiles any data and information gathered from applicants and uses it to create a more comprehensive rating of each potential tenant. One unique aspect of their process is that tenants can go through the application process through Rentspree’s platform, while the service returns results back to landlords once the screening is done, and the $30 screening fee is charged directly to the applicant.
Cozy is a full-service business where landlords can manage multiple common tasks. Their free online tools include accounting services like rent collection and deposits, creating rental listings, and tools for tenant maintenance requests and expenses.
As for tenant screening, Cozy assists with accessing basic credit reports and background checks, as well as organizing side-by-side comparisons of information provided by multiple applicants.
Transunion acts as the middle man between independent landlords and tenants with their SmartMove service. Landlords can create a free account with Transunion and then have the option to send an online application invitation to prospective tenants. The screening is then performed by Transunion with secured results being returned to the landlord. Their reports also include their ResidentScore, which is a grade used to predict eviction risk.
There are three major credit bureaus (Experian, Equifax, and TransUnion) and each of them offers credit checks for a small fee.7 These credit checks often give you the scores of all three credit bureaus, so if a credit score is all the proof you need, they’re fairly interchangeable.8 It’s worth noting that Experian will let your renters get their credit scores for free.9
However, there are other options. For example, TransUnion’s SmartMove service provides landlords with credit checks, criminal and eviction backgrounds, as well as other economic data that could help a landlord determine whether or not the tenant is a good match.10
Property management software has become something of a catch-all for landlords. If there’s a way to digitally manage a task to make life easier for the landlord (and to make a few bucks in the process), property management software is all over it. That includes tenant screening.
Some property management companies will charge extra to do tenant screening services. Others include it as part of one of their packages. The nice part about going through a property management software site for this service is that many of these software platforms bundle the tenant screening with other services, making it an added value for landlords. Why make a renter pay $50 for a tenant screening from a credit union when you could get that and a professionally developed digital portal for you tenants for less money per tenant per month with property management software? (At least, that’s the question the companies hope you’ll ask.)
If you think property management software might be a solution for you, be sure to check out our recent blog on the 5 top property management software solutions of 2020.11
Don’t forget the forms!