Effective tenant screening can be the difference between collecting rent on a predictable schedule and second-guessing your tenant’s ability to pay on time.
Because your business relies on responsible tenants, we’ll guide you through eight steps that all landlords and property managers can incorporate into their processes to fill their units with high-quality tenants.
Stay tuned for an in-depth review of how successful real estate investors and landlords screen tenants.
How to Screen a Tenant in 8 Steps
The goal is to identify applicants who are most likely to meet the criteria of a great tenant. Here’s how to do it:
- Use a Prescreener
- Collect Applicant’s Information and Consent
- Gather Criminal and Credit History
- Put Together a Full Rental History
- Contact All References
- Review and Analyze Collected Information
- Interview Applicants and Ask Clarifying Questions
- Decide on a Tenant
1. Use a Pre-screener
During the screening process, the landlord will compile data about the applicants to predict their future viability. The first step is to use a prescreener to ask qualifying questions before sending a formal rental application.
While asking the applicant directly doesn’t always result in trusted answers, there are a few reasons to begin every screening process this way:
- Landlords can filter out the obviously unqualified applicants. All landlords should establish minimum standards that their tenants must meet. In a prescreener, you can gain insight into an applicant’s employment status, income, credit score, pet ownership, and smoking status. If they aren’t employed, you can probably move on.
- Landlords can compare the gathered data to what’s answered here. Because a tenant is likely to provide biased answers, you can verify it later. If any discrepancies arise, you can either dismiss the application or talk to the renter for verification.
- Many applicants won’t apply at all. Once an applicant sees the questions on the prescreener (and that the landlord plans to verify all of the answers), they might decide to withhold their application altogether. Fewer unqualified applicants are always a good thing.
Be sure to keep the same standards for all applicants. Asking different questions or raising the required credit score for a particular applicant you find unappealing is grounds for discrimination.
2. Collect Applicant’s Information and Consent
Of course, landlords will need to have some information to continue screening the applicant, such as:
- Name
- Date of birth
- Phone
- Current address
- Current employer and phone number
- Previous (or current) landlord and phone number
- 2-4 personal references
- Social Security number (optional)
In the past, Social Security numbers (SSNs) were considered perhaps the most important piece of information gathered, next to the applicant’s name. Nowadays, landlords send an online rental application link to a tenant, and the tenant inputs that information themselves.
But be sure to get the applicant’s consent to gather more information about them. Without consent, not only will many referrals not speak to the landlord, but they may also be guilty of violating HIPAA and FHA regulations.
On the consent form, be sure to specify each of the ways that you plan to gather information. Methods could include:
- Using tenant screening companies to pull credit and criminal background reports
- Contacting current and previous landlords
- Contacting current and previous employers
- Contacting personal references
- Requiring additional credit and personal references upon request
Of course, consult with an attorney to ensure compliance with all local and state laws.
3. Gather Criminal and Credit History
At this point, the landlord will begin to gather in-depth information about the tenants.
Gather Criminal History
Criminal history usually includes a 7-year history of any misdemeanor and felony convictions for the applicant. Juvenile records are handled on a state-by-state basis, but are often expunged at a certain age.
It is illegal to consider arrest records when selecting a tenant for the property. Don’t ask about this information, but if you happen to come across it, don’t use it as a determining factor.
Most commonly, tenant screening companies gather information on a tenant’s criminal history. Varying services offer different types of reports:
- State-only crimes: Cover only the crimes committed in the state. It’s not best practice to pull state-only reports, but it’s more cost-effective.
- State and nationwide crimes: Pulls criminal data at the national level. For landlords, it can be helpful, but you’ll want a deeper look into credit, eviction, and income.
- Full criminal, credit, eviction, and income history (and sometimes more). Companies like Rent Butter conduct comprehensive tenant background checks to help landlords make informed decisions.
It is also possible to obtain criminal history information for much less, or even for free. Each state has a website that includes criminal records, and many of these records are available for free.
However, there are a few problems with gathering criminal records for free:
- Online records aren’t always comprehensive. Some online court records may only provide brief summaries or be incomplete, missing certain information.
- Some states charge for pulling data. It’s free in some places, but it costs money elsewhere. If you’re going to pay, you might as well pay for a professional service to pull the report.
- Takes too much time. Pulling criminal reports for each applicant can be much too time-consuming for most landlords.
Gather Credit History
Landlords can choose to gather a simple credit score or obtain a comprehensive credit history. A credit history contains a record of the applicant’s past seven years of financial history, including a list of all creditors, amounts owed, payment history, bankruptcies, judgments, liens, collection accounts, and more.
A credit score is a summation of a credit history distilled into a single number. In other words, a credit score is a measure of a person’s ability to fulfill their financial obligations.
In general, it’s best practice to get both the credit score and credit history (provided the credit score is high enough to merit consideration to rent the property).
Like conducting a criminal background check, it’s most common to hire a tenant screening service to pull a full credit history. Landlords can do it in a few ways:
- A la carte credit history. You can obtain credit histories independently with services such as Experian Credit Report & Score.
- As part of a comprehensive tenant screening report. As mentioned above, most landlords opt to have a tenant screening service conduct a thorough background check, including full credit, criminal, eviction, and income history checks.
It is possible to have credit reports pulled for free. Each of the three main credit bureaus (TransUnion, Equifax, and Experian) is required to provide a free full credit report every 12 months. A landlord can request that the applicant obtain their credit report and send it to them for review.
It’s an uncommon practice because the applicant can alter the report, or the report may be outdated if they pulled their free report a few months back. Most landlords will get credit histories as part of a tenant screening service.
Paying For Tenant Screening Services
In most states, landlords can charge an application fee, which they use to cover the costs of tenant screening. However, this isn’t the case in all states, as some have imposed limits on the amount a landlord is allowed to charge. In these cases, property owners will often have to cover some or all of the tenant screening service costs.
It’s still worth the cost, even if it’s out of pocket, because of the long-term advantages to finding excellent tenants. The income from a tenant who pays consistently month over month makes up for any screening costs.
4. Put Together a Full Rental History
Rental histories usually consist of the following:
- Dates and addresses of residences
- Contact info for landlords
- How much the applicant paid in rent
- Evictions
- Late/missed payments
- Broken leases/rules
- Recommendations from previous landlords
Most tenant screening reports will reveal addresses, evictions, and missed payments, provided such information is allowed by law. Missed payments may appear, but they will only be reported to credit bureaus after 30 days, and even then, some landlords may choose not to report them.
The rest must be gathered by talking to previous landlords. This step is essential in a thorough screening process because you’ll be speaking with someone who has rented directly to the applicant. They will know better than anyone else if the applicant is worth taking on. Just beware: If they speak in glowing terms and they’re still living in the property, the landlord might be trying to get rid of them.
Here are a few questions to ask previous landlords:
- Would you rent to them again?
- Did they pay rent on time each month?
- Did they reasonably take care of the property?
- Did they break any of your lease agreement rules?
- Did they give proper notice before leaving?
- How was their communication style?
- Did they smoke on or near your property?
- Did they get their full security deposit back?
Most of these questions require a simple yes or no. The reason landlords ask yes-or-no questions is that it keeps both parties on topic and away from topics that can potentially result in a discrimination lawsuit.
For example, don’t ask “Did the tenant have kids?” The Fair Housing Act (FHA) prohibits discrimination based on familial status.
It’s true that the “Would you rent to them again?” question can lead to some of these issues, but it’s such a wonderful question to get at the heart of what you want to know about your applicant. If the previous landlord gets into dangerous territory when answering this question, you can steer them away or disregard what they’re saying.
5. Contact All References
Since you’ve already contacted previous landlords as part of the rental history, the next step is to contact the employer and personal references.
Contact Employer
The primary purpose of contacting employers is to verify their income, as well as their job title and the duration of their employment. Verifying their income confirms they can pay the bills, but the other two points of information can still provide some insight.
If they hold a strong job title, such as an executive or director, they’re likely to have increased earning potential, even if they leave their current position. Duration is also nice to know, as a longer stay at a company shows that they’re valued, committed, and less likely to be fired.
These may be a little nitpicky, but every data point matters if there are dozens of applicants.
Here are a few example questions to ask an applicant’s employer:
- What is their annual salary?
- Do they have a history of missed work?
- Do they have a history of being late to work?
- Do they have a history of disciplinary issues?
- How long have they worked there?
- What is their job title?
- Anything else I should know?
Finally, make sure you’re talking to the right person. One trick for this is to call the company’s general phone number and ask the receptionist to transfer you, rather than calling a number given on the application that could be a friend posing as a manager.
Contact Personal References
Generally, personal references are likely to provide glowing reviews of the applicant. However, a few specific questions can provide some of the answers needed. In addition, after you get into the flow of these calls, you can begin to tell when someone hesitates or doesn’t tell the whole truth.
Adding one or two open-ended questions can help gauge the applicant’s perspective. For example, you can ask, “Can you describe their character?” If the answers sound trite and generic, that’s a bit of a red flag. If the person gushes about the applicant with specific examples, that’s more believable.
Here are a few example questions to ask an applicant’s personal references:
- What is your relationship to them?
- How long have you known them?
- Would you rent to them?
- Do they have a history of financial trouble?
- Can you describe their character?
- Would you describe them as being reliable?
- Do they smoke?
- Do they have any pets? What kind?
- What condition do they keep their house in?
Don’t skip this step—any good landlord will turn over every stone in the quest for the best applicants.
6. Review and Analyze Collected Information
In reality, landlords will be analyzing information at every step of the way. If they apply with subpar qualifications, reject them immediately. If you find evictions on their rental history and can use this information in accordance with your state’s laws, don’t proceed with the applicant.
The reason for this is twofold: time and money. If a landlord gets 40 applicants, they simply don’t have the time to go through all of them. If an initial scan of applications can result in rejecting 30 of those, that’s a significant win.
Plus, tenant screening reports cost money as well. Even though application fees generally cover the costs for these, that’s still money out of a landlord’s pocket. If the tenant screening costs $50, a landlord would rather do 5 of those than 40 to save $1,750.
Analyzing Rent-to-Income Ratio
The number one reason for rejecting an applicant is based on their income. If the person clearly can’t pay the rent, then that’s the most obvious reason to deny them.
The rent-to-income ratio is a good rule for them for quickly determining if someone earns enough money to pay the rent.
The formula for rent-to-income is:
Rental price / gross monthly income
If your unit costs $2,000 to rent, and the applicant makes $8,333 per month (roughly $100k per year), then you’ll get this equation:
$2,000 / $8,333 = 24%
A general rule of thumb is to find applicants with a rent-to-income ratio below 30%. This number is becoming increasingly difficult to reach due to rising rental prices, so it may be a matter of selecting the best applicant among the candidates.
Rent-to-income, however, doesn’t tell the whole story because it doesn’t include debt. If two applicants earn $100k, but one of them has two massive car payments, that changes things drastically.
A more effective approach is to focus on the debt-to-income ratio, which considers both the monthly rental payment and other monthly financial obligations.
Analyzing Credit History
Generally, a landlord will first review the credit score, but may also examine individual items in the full credit history.
It’s fairly standard for landlords to look for a minimum credit score of 650-670. In that range, you’ll find people who have mostly made payments, but may have missed a few along the way. You can also get people who are newer and haven’t had time to build a higher score.
You can also find individuals who have more serious infractions in their history, but enough time has passed that they have been able to rebuild their score to this level.
This is why it’s essential to review their credit history as well. For example, if you decide to take a no-nonsense approach to past bankruptcies, then you might deny someone with a decent credit score.
However, it’s generally best practice to take into account how much time has passed. If the applicant has a pristine credit history since their bankruptcy 5 years ago, you’re likely looking at a good candidate.
Analyzing Criminal History
In general, landlords with decent demand will turn down applicants with any sexual or violent crimes in their past. You’ll need to examine many other felonies on a case-by-case basis.
For example, a white-collar crime that occurred five years ago may be something a landlord can overlook, especially if there aren’t other, more qualified candidates. However, be wary of financial crimes, as you will be handling money with your tenants.
Some misdemeanors should also raise red flags for the landlord. For example, any recent instances of vandalism or property destruction can indicate a pattern of behavior that you should take steps to protect your property from.
Also, domestic abuse of any sort is another issue that you don’t want to deal with. Neighbors calling the police on your tenants for this sort of behavior isn’t ideal.
Analyzing Rental and Eviction History
Evictions are one of the costliest expenses for any property owner. If any applicant shows evictions (especially recent ones) or a pattern of behavior that could lead to evictions, it’s best to deny that applicant.
For example, if they’re consistently paying rent late (or have missed payments), that’s a frequent headache that could turn into a disaster with an eviction. When it comes to analyzing rental and eviction history, the best thing a landlord can do is to have a written list of what’s acceptable and what isn’t for their applicants.
7. Interview Applicants and Ask Clarifying Questions
At this point, you might have one applicant who stands above the rest. If this is the case, proceed to the final step.
Otherwise, it’s time to take the remaining applicants and have a conversation with them. An important part of this conversation would be to ask any clarifying questions about items you found during the information-gathering process.
Here are a few examples:
- Would you mind telling me the circumstances behind your bankruptcy?
- I see that you have property destruction on your criminal record. How can I be sure you won’t damage my property as well?
- I see a 6-month gap between jobs. Could you please explain why that happened?
The goal of this conversation is to finalize the screening process and ensure you have all the necessary information to make an informed decision.
8. Decide on a Tenant
You’re almost there! Now it’s time to pick a tenant.
Here are some of the most common ways one applicant will be superior to another:
- Higher income
- Lower debt
- Higher credit score
- Better criminal background
- Better rental history
- Better eviction history
- More praise from references
- Better communication style
- More stable job situation
- Doesn’t smoke
- Doesn’t have pets
- Agrees to lease rules (seems more likely to follow them)
- Fewer vehicles
- Has lived in the area longer
- Earlier application submission
All else being equal, it’s best practice to choose the applicant who applied first. A rejected applicant could claim discrimination if they were well qualified and applied first.
And while we just covered eight steps to screen tenants properly, let’s take a look at what to do when you inevitably reject those who don’t fit your criteria.
How to Properly Reject Applicants
Selecting the right applicant doesn’t mean the tenant screening process is complete. The rest of the rejected applicants need to be handled correctly, or the landlord could land in hot water.
Avoid Housing Discrimination Laws
The Fair Housing Act outlines a list of protected classes that landlords and property managers are prohibited from using as the basis for rejecting a rental application. These protected classes are:
- Race
- Religion
- Color
- National Origin
- Familial Status
- Sex (including gender identity or orientation)
- Disability
Discrimination against these protected classes can occur during advertising, in the application questions themselves, during the screening process, and (most commonly) when selecting the final applicant.
It’s fairly easy for a landlord to break discrimination laws unintentionally, so it’s important for a landlord not even to give the appearance that they could be discriminating. Here are a few best practices:
- Do not discuss anything related to a protected class with a reference. For example, it may seem innocuous, but don’t ask questions like “Do you know where he is originally from?” or “When are you due?”
- Keep a list of minimum standards for your rental. If there isn’t an apparent reason why someone is rejected, they could choose to believe that it’s because they belong to a protected class and sue. However, if you have a written list of standards, and the applicant falls short, they won’t have a case.
- Notify every rejected applicant. The law requires you to notify every rejected applicant if the reason is due to information listed on a consumer report. However, best practice is to notify all of them and give a reason why. This practice will nip most discrimination cases in the bud.
- First come, first served. As mentioned above, this is standard practice for selecting applicants, assuming all other factors are equal.
Reasons a Landlord Cannot Reject an Applicant
There are many other sub-groups not explicitly mentioned by the FHA, but would fall under one of those seven groups. Some examples include:
- Family size (can’t reject them because they have kids, or if a couple isn’t married)
- Marital status (e.g., an unmarried couple can’t be turned away)
- Age (some landlords discriminate against the young or the old)
- Primary language spoken at home
- Participation in the Section 8 program or other subsidized programs
- Arbitrary discrimination (e.g., someone with tattoos)
Remember, do your best to avoid discussing any of these topics. For example, discussing someone’s children can be a sensitive subject. Some landlords prefer not to rent to couples with children, so they will try to find out if the applicants have children. Don’t do this—it’s not worth a potential discrimination suit.
Reasons a Landlord Can Reject an Applicant
Now that we’ve talked about some potential pitfalls, it might seem like there are hardly any legitimate reasons left to reject an applicant.
Not only is this not the case, but there are plenty of legal reasons to deny an applicant. Here is a list of the most common:
- The debt-to-income ratio is too high
- Can’t verify income
- Poor credit history
- Has a bankruptcy on record
- History of late payments
- Prior evictions
- Prior convictions
- False information on the application
- Refusal to consent to gather credit, eviction, criminal, or rental history
- Illegal activity
- History of damaging property
- Smokes
- Has pets (not ESAs or service animals)
Final Thoughts
Tenant screening doesn’t have to intimidate you. A lot of the considerations you will likely be wary of, like Fair Housing Act regulations, are pretty simple to avoid. Be sure to treat all applicants equally, and you’ll be fine.
Once you get the hang of it, screening tenants will become just another chore to complete.
Thanks for reading!
