The Do’s and Don’ts of Tenant Screening: Explained

Did you know improper tenant screening can lead to costly legal issues for landlords? In October 2018, a Massachusetts landlord was fined a whopping $43,500 after refusing to rent to families with children or pregnant women, according to Mass Live. That came barely a year after an NYC landlord was hit with a lawsuit for housing discrimination whereby the landlord quoted higher rental rates to black prospective tenants.

These instances underscore the critical importance of proper tenant screening for landlords. While it’s the first line of defense for landlords against problematic tenants, when conducting it, it’s essential to operate within the confines of the stipulated law to avoid legal disputes. 

In this guide, we’ll cover the do’s and don’ts of tenant screening. By being well-acquainted with the insights in this post, landlords can reduce potential legal issues while providing tenants with a positive rental experience.

Understanding Tenant Screening: What It Is and Why It’s Important 

Tenant screening is a process of evaluating prospective tenants to determine if they’re suitable to rent a property. 

It involves checking:

• Credit history
• Criminal background
• Rental history
• Employment status, and other relevant factors.

Landlords must follow specific guidelines and regulations to avoid legal disputes when conducting this process. To stay away from legal troubles, it’s recommended to read the FCRA-compliant tenant guide, utilize industry-accredited online tenant screening tools for landlords, and follow the tips below:

The Do’s of Tenant Screening for Landlords 

• Verify Rental History, Employment, and Income
• Check Credit Reports and Score 
• Obtain Relevant Character References 
• Perform Background Checks & Criminal Records Search 
• Critically Evaluate Application Demographic Information 
• Examine Past Evictions and Applicants’ Financial Habits
• Follow Fair Housing Laws and Regulations 
• Vet for Drug Use or Activity Indicators 

Verify Rental History, Employment, and Income 

One of the do’s for tenant screening for landlords is to verify an applicant’s rental history, employment, and income. 

This involves contacting the applicant’s:

• Current landlord
• Previous landlords
• Employer 

The process involves confirming that the applicant is reliable and has the means to pay rent on time. This step will help you avoid potential financial losses and ensure that you only rent out your property to tenants with a good reputation in that respect. 

Check Credit Reports and Score 

As a landlord, it is crucial to get a clear understanding of a potential tenant’s financial history, and one of the best ways to accomplish this is by running a credit check. 

A credit report reveals a tenant’s financial obligations, such as credit card and loan payments, bankruptcies, and other financial information. 

A credit score, on the other hand, is a numerical value that rates a tenant’s creditworthiness. 

Checking the two will help the landlord evaluate an applicant’s financial health and determine if they have a history of paying bills on time, which is essential in ensuring timely rent payments.

Obtain Relevant Character References 

When screening potential tenants, it’s fundamental to obtain relevant character references, as it can help shed light on an applicant’s personality, behavior, and adherence to roommate etiquette.

Character references can come from former landlords, employers, or even previous roommates and can provide valuable insight into a tenant’s past behavior and habits. It’s always a good idea to follow up with these references to verify the information provided by the applicant. 

Of course, ensure you also confirm that the references provided are legitimate, not simply friends or family members posing as past landlords or roommates.

Perform Background Checks & Criminal Records Search 

Performing a background check and criminal records search enables landlords to verify whether prospective tenants have a criminal past that could potentially cause harm to other tenants or the property. 

Conducting a background check helps landlords evaluate applicants’ financial history, employment status, and rental history. It’s important to note that landlords must follow the Fair Credit Reporting Act (FCRA) when conducting background checks to avoid violating tenant rights. 

To perform a thorough background check, landlords can use various online screening services or work with a professional screening agency to obtain relevant information. 

A comprehensive background check should include the following:

• Applicant’s eviction history
• Employment status
• Credit history
• Criminal records

Proper examination of these aspects will allow landlords to better ensure the safety of their property and other tenants.

Critically Evaluate Application Demographic Information 

As a landlord, evaluating an applicant’s demographic information is crucial before renting out your property. While you can’t discriminate based on specific characteristics such as race or religion, examining this information can help determine whether an applicant is a good fit for your property. 

For example, if you’re renting out a property that requires a lot of maintenance and the applicant doesn’t have a steady job, it may not be a good match. Alternatively, if you’re renting out a luxury apartment, you’ll likely want to find a tenant who can afford the rent comfortably.

Remember to always follow fair housing laws and avoid making decisions based on personal biases.

Examine Past Evictions and Applicants’ Financial Habits 

One critical aspect of tenant screening is examining an applicant’s eviction history and financial habits. 

Checking for past evictions is essential as it can provide insight into an applicant’s past behavior as a tenant. If a potential tenant has a history of eviction, it could indicate a recurring issue that could be problematic in the future. 

Evaluating an applicant’s financial habits, such as their credit card debt, loan history, and financial standing, is also crucial in determining their ability to pay rent. Look for any patterns of delinquency or inconsistencies in their payment history, as this can be a red flag for future payment issues. 

As the potential landlord, you don’t have an interaction history with the prospective tenant, so relying on these two factors gives you an idea of their rental behavior in the past and how likely they are to cause you headaches in the future.

Follow Fair Housing Laws and Regulations 

As a landlord, it’s crucial to abide by fair housing laws and regulations when screening tenants. The Fair Housing Act prohibits discrimination based on the following: 

• Race
• Color
• National origin
• Religion
• Sex
• Familial status, or 
• Disability. 

Therefore, it’s paramount to treat all applicants equally and avoid discriminating against any protected classes. 

Additionally, landlords should be aware of state and local fair housing laws, which may provide additional protections. 

Failure to comply with fair housing laws and regulations can result in serious legal consequences, including lawsuits and fines. 

Vet for Drug Use or Activity Indicators 

It is essential to vet for drug use or activity indicators during tenant screening, which is a vital step in the rental application process. As a landlord, you must ensure that you rent your property to responsible and reliable tenants who will maintain it and comply with your lease agreements.

Drug use by a tenant can cause significant damage to your property and put you, other tenants, and your property at risk. Therefore, it is necessary to perform a thorough drug screening to protect your property and other tenants. 

A few tips when vetting for drug use include:

• Checking for unusual behavior
• Be careful to check whether the applicant has a past drug-related offense
• Strange odor coming from the applicant

Of course, remember to adhere to all the applicable housing laws and regulations while conducting your search.

The Don’ts of Tenant Screening for Landlords 

• Don’t Rely Solely on Credit Scores
• Don’t Be Discriminatory
• Don’t Take on a Tenant Without Proper Verification 
• Don’t Skimp on Background Checks 
• Don’t Assume the Best About Every Applicant
• Don’t Make Your Own Rules When It Comes to Rental Requirements
• Don’t Forget to Check References and Follow Up 
• Don’t Move Too Quickly Through the Application Review Process 
• Don’t Neglect Important Documents and Paperwork 

Now that you know what to do when screening tenants, it’s essential to know what not to do. This section outlines some common mistakes landlords make when screening potential tenants and provides tips to avoid them.

Don’t Rely Solely on Credit Scores

As a landlord, relying solely on credit scores may not give you the complete picture of an applicant’s financial stability. 

Certainly, credit reports and scores can provide valuable insights into an applicant’s financial history. However, there are several factors that can affect an individual’s credit score that may not necessarily reflect their current financial status or ability to pay rent. 

By not solely relying on credit scores, landlords can avoid rejecting potential tenants who may have a lower credit score but are otherwise financially responsible. 

Additionally, landlords can save themselves from financial loss by looking at a broader range of factors, such as rental history, employment, income, and character references, when evaluating tenant applications.

Don’t Be Discriminatory

Discrimination based on factors such as race, gender, religion, or familial status is not only unethical but also illegal under fair housing laws. 

Landlords must avoid any practices that could be perceived as discriminatory, such as using different screening criteria for different applicants or making assumptions based on personal biases. 

By adhering to fair housing laws and avoiding discrimination, landlords can ensure they select tenants based on objective criteria and minimize the risk of legal issues or reputational damage.

Don’t Take on a Tenant Without Proper Verification 

It’s crucial not to take on a tenant without proper verification. This means conducting thorough background checks, which should include verifying their employment, income, rental history, and other factors. You should also consider running a credit check to ensure they have a reputable financial history. 

Failure to verify a tenant’s information can lead to problems down the line, such as missed rent payments, damage to the property, or even legal issues. 

Taking the time to vet your tenants properly can save you a lot of trouble and ensure a smooth and stress-free tenancy.

Don’t Skimp on Background Checks 

Don’t make the mistake of skimping on this critical step, as it could cost you in the long run. 

By verifying a potential tenant’s employment, income, rental history, credit score, and criminal background, you can make an informed decision and reduce the risk of financial loss or damage to your property. 

While it may be tempting to skip over this step to save time and money, taking the time to screen tenants properly can save you from future headaches and ensure a successful landlord-tenant relationship.

Don’t Assume the Best About Every Applicant

When finding a tenant for your rental property, it’s natural to want to believe the best about every applicant. However, it’s important to remember that not everyone will be forthcoming about their past and present circumstances. 

Even if someone seems friendly and trustworthy, it’s always better to be safe than sorry. Don’t assume that just because someone has a good job or appears to be financially stable, they will be a good tenant. 

Conduct thorough background checks and ask for references to better understand the applicant’s rental history and financial situation. Taking the time to vet potential tenants properly can save you from headaches and financial loss down the line.

Don’t Make Your Own Rules When It Comes to Rental Requirements

As a landlord, following the laws and regulations governing the rental industry is essential.

While it may be tempting to create your own rules and regulations, doing so can land you in legal trouble and put your tenants at risk. 

Research and understand your rights and responsibilities as a landlord, as well as those of your tenants. It will help you avoid making arbitrary decisions that could result in lawsuits, eviction proceedings, or other legal issues. 

Remember, the law is in place to protect both landlords and tenants, and ignoring it can have serious consequences.

Don’t Forget to Check References and Follow Up 

Ensure you don’t skip checking references and making a follow-up. It can provide valuable insights into a potential tenant’s past behavior and reliability. 

Requesting references from previous landlords, employers, and personal contacts can help verify information provided by the applicant and give you a better idea of their character and history.

It’s also important to follow up with references to confirm the accuracy of the information provided and ask any additional questions you may have. 

Taking the time to check references and follow up ensures you can make a more informed decision about who to rent your property to.

Don’t Move Too Quickly Through the Application Review Process 

Avoid rushing through the application review process when selecting tenants. Carefully assess each applicant’s information to ensure they meet your rental criteria. Otherwise, you may overlook crucial information that could help you make a more informed decision. 

Review each applicant’s credit report, employment history, rental history, and other factors earlier stated.

Additionally, verify their income and contact their references to ensure they have an impressive rental history. That way, you can make a more informed decision and reduce the risk of renting to a problematic tenant.

Don’t Neglect Important Documents and Paperwork 

Lastly, avoid overlooking critical documents and paperwork when renting out your property. Ensure you have all the necessary documents in place. 

That includes: 

• A lease agreement
• Tenant application
• Move-in/move-out checklist, and 
• Any state-required disclosures. 

Familiarize yourself with the Fair Housing Act and other applicable laws and regulations to ensure that all the necessary paperwork is complete and that you are not violating any tenants’ rights. 

Failing to have the correct documentation can cause legal issues and result in financial losses. As such, have all documents reviewed and signed by all parties before the tenant moves in. Don’t make the mistake of neglecting crucial documents and paperwork when renting out your property.

Hiring a Property Manager Will Make Your Life Easier as a Landlord

Landlords who own multiple properties or have a busy schedule often find it challenging to manage their properties and tenants effectively (which is one of the primary cons in renting out your property, especially privately). In such cases, it can be highly beneficial to hire a property manager to take care of the day-to-day operations of the rental properties, including tenant screening. A property manager has the knowledge and expertise to deal with various tenant-related issues, including collecting rent, handling tenant complaints, screening potential tenants, and handling maintenance and repairs. 

They can also ensure that the property is up to code and meets all legal requirements. By hiring a property manager, landlords can save time and stress while ensuring that their rental properties are managed professionally and efficiently.

Conclusion

In conclusion, tenant screening is vital when deciding who you can rent out your property to. But you must do it with caution and attention to detail to avoid costly mistakes and legal issues.

Follow the do’s and don’ts outlined in this article to reduce the risks and ensure you find the right tenants for your properties. Of course, ensure that you check your local housing laws before doing tenant screening.