Most landlords conduct a tenant background check before making a decision on an application. Screening helps find applicants who are likely to be good tenants.
If you're a DIY or first-time landlord, it's essential to know how to screen a tenant. There are a handful of tools at your disposal, including credit checks, rental history, employment record, and criminal background.
This article will help you learn how to use these tools to check a rental applicant and make an informed decision.
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Tenant Credit Checks
To be fair, a credit check isn't a foolproof way to establish a tenant's financial wellness. Having bad or poor credit doesn't necessarily mean someone cannot afford their rent. For what it's worth, there are wealthy people with terrible credit scores just because they defaulted on a loan and never bothered to settle it once their income stabilized.
Nonetheless, credit checks, when used alongside other tenant screening tools.
An applicant's credit report will give you insights into their recent payment records. If they have defaulted on a loan in the last couple of months, for example, it's a sign they could be under financial pressure and might struggle to make their rent on time.
Criminal Background Checks
Tenants who engage in criminal activity while living on your property can make your life as a landlord stressful.
Depending on the nature of the crime, your rental can be declared a crime scene for days. If it's a multi-unit building, this will negatively affect other tenants' sense of privacy as law enforcement officials process the scene. If a tenant is jailed, you're looking at the possibility of zero rental income until the eviction process is complete.
This is why performing a criminal background check is crucial for landlords. An applicant with a criminal history is a red flag, but it's important to look further into the nature of the crimes before making a decision.
Employment History
Employment history is one of the most crucial background checks for tenant screening.
It gives you information on the applicant's current employment status. If they're not employed, obviously you'll want to probe further into their ability to afford the rent. Bear in mind that a person might be unemployed but have passive streams of income.
If the applicant has a history of job hopping, that may not be a good sign, especially if they go several months between jobs. About 60% of Americans live paycheck to paycheck. A month with a job could be all a tenant needs to default on their rent.
Rental History
Rental history tells you whether an applicant has an eviction on their record or not. You can also tell whether they're likely to renew their leases.
An eviction record is a big red flag. And for tenants who are ever moving, it's an indication that they often break lease agreements, or don't renew leases.
Savvy Landlords Do a Tenant Background Check
Conducting a tenant background check enables you to find high-quality renters for your property. From criminal and credit checks to employment and rental records, there are plenty of tools to help you assess an applicant's suitability as a tenant.
If you'd like to use professional tenant screening services, contact PMI Paramount. We're a full-service property management company serving landlords in New York City.
