Key Takeaways
- Effective tenant screening helps landlords reduce financial risk, protect their property, and improve operational efficiency by selecting reliable tenants with strong rental and financial histories.
- A consistent screening process should include clear rental criteria, pre-screening questions, formal applications, and thorough credit, background, income, and reference checks.
- Landlords must follow Fair Housing and consumer reporting laws throughout the screening process to ensure fairness, transparency, and legal compliance when approving or denying applicants.
As a landlord, every time you lease your property to a tenant, you take on a huge risk. Each new tenant in your rental property is a total stranger, and you really have no way of knowing what that person is capable of.
There is a real possibility that they will not pay the rent, damage your property, and embroil you in costly, time-consuming litigation.
The only way for landlords like you to mitigate this risk is to find a tool that offers them a sneak peek into the tenant’s background. Since past behavior is the best predictor of future behavior, landlords can use a person’s background to judge how they might act in the future. This process is known as tenant screening.
Keyrenter Layton has put together the following guide on effective tenant screening in Layton, Utah.
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What is Tenant Screening?
Tenant screening is a systematic procedure used by landlords and property managers to evaluate the suitability of a prospective tenant for a specific rental property. The goal of tenant screening is to minimize the landlord’s risk of financial loss by selecting tenants who are more likely to fulfil their lease obligations.
To assess each rental application, tenant screening looks at data from key areas of a prospective tenant’s life, such as their credit history, criminal background, eviction records, employment, income, and rental history. Depending on how the tenant scores across these different areas, the application is either accepted or denied.
It is difficult to overstate the importance of detailed tenant screening for landlords.
Proper tenant screening transforms your property from a potentially high-risk liability into a predictable, income-generating asset. It does this by affecting these three critical areas:
- Financial: By letting you review credit reports and verify income, tenant screening ensures stable cash flow, minimizes the risk of costly evictions, and reduces turnover costs.
- Safeguard property: Landlords who prioritize tenant screening have lower repair and maintenance costs because they lower the risk of damage due to neglect or malice.
- Operational efficiency: Standardized screening processes protect landlords from legal troubles. Vetted tenants often show more professionalism and respect for rules.
A Quick Guide to Effective Tenant Screening
1. Define Your Rental Criteria
These are the minimum standards you expect an applicant to fulfil to be eligible for consideration as a potential tenant. This list ensures consistency and fairness in the way you assess rental applications. It must comply with the requirements of the Fair Housing laws.
Typical criteria include:
- Verifiable income: Applicants must have a gross monthly income of at least 3 times the rental amount, verifiable by pay stubs, bank statements, or tax returns.
- Credit score: A minimum credit score of 620-650, without a recent history of unpaid debts, bankruptcies, or delinquent accounts.
- Rental history: No evictions or broken leases in the last 7 years, and evidence of timely rent payments with positive feedback from past landlords.
- Background check: No history of violent crimes in the last 10 years, and a list of categories of accepted criminal history.
- Photo ID: A copy of a valid government-issued photo ID.
2. List of Pre-Screening Questions
Pre-screening questions makes your work easier. By providing a list of questions that applicants must answer, you avoid wasting valuable resources on background checks or showing your property to unqualified applicants.
These questions should be asked upon your first contact with the applicant via phone, email, or digital form, and they should include:
- What is your monthly household income?
- Why do you want to move out of your current rented home?
- Have you ever broken the lease early or been evicted from a rental property?
- How many people (adults + children) will live with you in the unit?
- How soon would you like to move in?
- How long do you want the lease to last?
- Do you have pets? If yes, what kind, what is their weight, and breed?
- Do you or anyone who lives with you smoke or vape?
- Do we have your permission to do a credit/criminal background check on you?
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3. Create a Formal Rental Application
This form collects information in a structured format that makes applications easy to review
It should collect details like:
- Essential information: Applicant’s contact info – full legal names, date of birth, phone number, email, Social Security Number, a copy of a government-issued photo ID, household details (including pets), and vehicle details.
- Financial & employment: Proof of income with recent pay stubs, tax returns, or bank statements. Employer details with job title, employment duration, and supervisor’s contact info. Rental history with addresses for the last 2-5 years and contact information of previous landlords.
- Authorization and disclosures: The applicant must give their consent for credit and background checks, and the landlord must provide a copy of the Fair Credit Reporting Act (FCRA) explaining the tenant’s rights.
4. Conduct Credit and Background Checks
These can be done using online professional tenant screening platforms. The cost of this service ranges from $25 to $75, and it is usually covered by the tenant. To use this service, choose your preferred provider, obtain the applicant’s consent to run a credit & background check, send an invitation link to the applicant, and review the reports.
Online professional tenant screening services can provide details like a tenant’s credit score, eviction history, and criminal record instantly or within 24 hours.
5. Verify Income and Contact References
Use pay stubs, W2 forms, 1040s, 1099 forms, and bank statements provided by the applicant to verify their income. Write the employer to request a letter confirming their employment status and income.
Contact their past landlords to ask if they paid the rent on time, damaged the property, and if they would rent to them again.
6. Make a Final Decision
If you deny a rental application based on the outcome of credit & background checks, be aware that tenants have a right to contest those results. This is why it is vital to ensure transparency, fairness, consistency, and compliance with relevant laws during your tenant screening process. If you:
- Approve: Inform the applicant and set a deadline to complete the process
- Deny: Inform the applicant, and if the denial is based on their credit or background check reports, provide them with an Adverse Action Notice to let them know they have a right to dispute the data.
Conclusion
The success of effective tenant screening lies in its methodical approach and attention to detail. If you fail to follow the provisions of the law when screening potential renters, you risk exposing your rental property to costly legal issues.
This is why it is advisable to hire an expert like Keyrenter Layton to oversee this entire process or, better yet, talk to a reputable property management firm.