What you want is what every landlord wants: tenants who pay their rent on time, don’t bother the neighbors, and treat your property with respect.

It sounds simple enough, but unfortunately, not all potential tenants will fit the bill. And the wrong tenant can be a liability in more ways than one.

Eviction is every landlord’s nightmare, but it’s not the only possible bad outcome. Reasons why landlords should screen their tenants include:

• Saving money on repairs and replacement of damaged property
• Avoiding negligence lawsuits
• Keeping tenant turnover low
• Losing rental income due to vacancy
• Preventing damage to your reputation

Finding the right tenants isn’t always easy. Fortunately, a comprehensive tenant background check enables you to look for red flags in your applicant’s past behavior and helps you find the perfect tenant for your rental property.

Think of screening as an investment in your business or a form of insurance. It’s the closest thing you can get to a crystal ball.

Why financial history matters

A good look at your applicant’s financial history can tell you a lot more than just their salary.

These days, a credit check is a standard part of the tenant screening process. While credit scores are important, it’s the credit history that really tells you what you want to know.

Specifically, a credit check can tell you if your applicant has a history of late payments on rent, utilities, credit cards, or other bills. It also lets you know if your applicant is carrying significant amounts of debt, and if so, what kind. Too much debt may mean that if they lose their job, even temporarily, they may struggle to cover rent.

Derogatory credit marks such as bankruptcies, liens, judgments, and collection accounts are a warning sign that your applicant may have a history of mishandling their finances. A credit history also lets you see how often your applicant changes address. Frequent moves may be a sign that they’re skipping out on their lease before they have a chance to get evicted.

While credit history is important, it’s not the only thing to consider. If all else looks good, an uneven credit history or a low score doesn’t have to be a dealbreaker. In those cases, however, you may want to consider covering yourself with a higher security deposit or asking for a co-signer on the lease.

Will your tenant pay on time?

Landlords rely on the rent they collect to make their mortgage payments, pay utility bills and taxes, and stay on top of upkeep and repairs. Even if residents do eventually pay you, it’s a waste of your resources to have to constantly chase them down every time they’re late. Therefore, it’s important that tenants not only pay their rent but pay it on time.

There’s no landlord crystal ball that can give you 100% certainty that your tenant will always pay their rent in a timely manner. However, you can significantly raise the odds in your favor with a tenant screening process that can tell you all about their past behavior.

An applicant’s credit report will tell you if they have a history of paying their bills, including rent, late, and may tell you if they’ve been evicted in the past if there have been judgments for rent against them. Confirming employment and salary is also helpful. The rule of thumb is to look for regular income equal to at least three times the rental amount.

You can make it easier for your tenant to pay on time by setting the due date for rent shortly after, not before, they receive their monthly paycheck, and by making online payments possible. You can also use a carrot-and-stick approach by combining incentives, such as a small discount for paying early, with late fees.

Avoid uncertainty

Arguably, the most important reason why a landlord should screen their tenants is to keep themselves and their other residents safe.

Criminal acts committed by your tenants put your property and other residents in danger, can damage your reputation as a landlord, and can invite negligence lawsuits. Criminal background checks of your prospective tenants are one of the best things you can do to ensure the safety of your residents, your property, and yourself.

If an applicant has a criminal history, consider how recent, how often, and how serious the crimes were. A traffic violation from seven years ago may not influence your decision as much as an assault conviction from two years ago. And a single incident might not carry as much weight as repeated brushes with the law.

Depending on where you live, criminal history alone may not be legal grounds for denying a tenant, so be sure you familiarize yourself with tenant laws for your area.

Eviction history

Eviction is costly—getting rid of a troublesome resident usually costs $2,500 to $3,500, and may take a month or longer—meaning even more lost rent. It’s an expensive, time-consuming, and stressful process, so smart landlords do their best to avoid risky tenants.

Some evictions may show up on a credit report in the case of monetary judgments, but not all. Don’t rely on a credit report alone. The best way to check for a history of evictions is a nationwide eviction search.

Eviction records stay on file with the courts for seven years and typically show up in the records within two months.

How to screen tenants

In order to be fair to your applicants and protect yourself from accusations of discrimination, it’s vital to understand Fair Housing Act requirements and to follow all federal, state, and local laws around renting.

Long before you get to the screening stage, you can begin weeding out people who aren’t good fits by disclosing information about the property up front. Put your application fee, security deposit, lease terms, and pet and smoking policies in your ads.

Determine your minimum qualifications for income, employment, and credit history. You don’t need to make these public, but you should be careful to hold all applicants to the same standards.

It’s important to treat all applicants equally, and that includes screening: if you screen one, you should screen them all in the same way. Depending on the laws in your state, you may be able to pass the cost on to applicants, so don’t let cost hold you back from running background checks on each applicant.

Also, be aware of your responsibility to protect applicant privacy. Using a tenant screening process like EagleScreen’s, all you need from your tenant is their email address. Once you give that to us, we’ll take it from there, contact your applicant directly, and let you know when their background report is available. You can reduce your liability and make your tenant feel more secure by never seeing their social security number in this step.

Hold on to your screening reports. They can show that you’ve done your due diligence in vetting your residents. And if you’re accused of discrimination, they can help you point to valid, objective reasons why you turned an applicant down.

Final thoughts

There are plenty of reasons why landlords should screen their tenants, but they all boil down to peace of mind. A comprehensive screening gives you a three-dimensional view of your applicant’s potential as a resident and is one of your most powerful tools to ensure a long and happy relationship with your tenants. To learn more about EagleScreen’s tenant screening services, contact us today.