How to Screen Tenants for the First Time

Finding great tenants to occupy your rental property can be challenging for a first-time landlord, and many new landlords find themselves asking:

1. Where do I find a solid renter?
2. What characteristics are desirable in a potential renter?
3. How can I ensure the renter will be a good fit?

Picking the right tenant is one of the most important objectives for a first-time landlord. Choosing the wrong renter could lead to several costly consequences, such as rent non-payment or possibly an expensive eviction.

Preparing the property, advertising on the best rental listing sites, and hosting open houses are all essential pieces of the puzzle, but these tasks are just the start to overall success and profitability.

The most crucial part of the rental process is screening your potential tenants. While it may be tempting to “trust your gut” when it comes to verifying renter-supplied credentials on the application, it’s not always safe.

Our 2016 SmartMove survey reports 86% of landlords verify an applicant’s information. This is with good reason. The more pertinent information that a landlord can gather about a renter in terms of their credit history, background, income level, and eviction history, the more informed their decision will be about that renter’s risk.  

Use this guide to learn about the best tactics for screening tenants and gain insights on where to find the best tenant screening service.

Set Renter Criteria Ahead of Time

Before you start the screening process, decide which characteristics you’re looking for in your ideal renter. There are some good reasons to do this thinking ahead of time:

• You can list these traits in your rental listing
• You can tailor your applicant tenant screening questions
• You are clear on what kind of renter you want from the start

Here are a few examples of renter criteria you might consider:

• Clean criminal record
• Makes sufficient income
• No prior evictions
• Proven track record of paying rent on time

When setting criteria, make sure your expectations are fair and obtainable and abide by any federal or state-specific laws.

Provide Your Requirements in the Rental Listing

While high-quality photos and videos of your rental property can be great selling tools, it’s just as important to mention your basic requirements when creating an ad for your rental property. By setting clear expectations from the start, you can better steer away applicants who will not be a good fit. Notifying prospective tenants of your requirements upfront could help you gather a more qualified pool of applicants.

Your rental listing requirements might include the following:

• All applicants are required to submit a rental application
• All applicants are required to provide landlord references
• All applicants are required to complete a credit and background check
• Applicants are responsible for covering the cost of a full tenant screening

This list is a great starting point. Consider your personal expectations for the property and customize your rental listing requirements accordingly.

Questions to Ask Prospective Renters Prior to Tenant Screening

When you first meet possible renters, you should be prepared with some questions. Not only does this help break the ice, but it also gives you the chance to look for red flags during your initial interaction with a potential applicant. The objective is to get a feel for their character, learn a little bit about their background, and make an initial determination if they could be a fit before moving further with the process.

Here are some questions to consider asking potential renters:

Take some time to consider your overall interaction and conversation. Did they communicate well? Did their answers meet your expectations? If you decide that the prospect’s answers don’t align with your requirements, you may want to move to the next potential applicant.

Require a Rental Application

If a prospective renter has cleared your initial questions and decides to apply, ask them to fill out a preliminary application. You can find sample application templates at your local real estate association, create your own using a Microsoft Office template, or find one online.

The application should clearly state your screening policies. An applicant should understand that their application will only be considered if they provide proof of income, landlord references, and authorize a full tenant screening, which will reveal their background and criminal, eviction, and credit history.

Along with the above materials, the typical rental application should ask prospective tenants for the following information:

• Full legal name
• Birthday
• Email address
• Phone number

Be sure your rental application follows legal stipulations, and do your research on the do’s and don’ts of rental application fees.

Review the Application

Once the application is complete, review it to see if the applicant meets your tenant criteria. Here are some questions to consider when you review your prospective tenant’s application:

• Do they have an established credit history?
  • A credit score can help to determine if a tenant has a history of paying bills on time.
  • In a TransUnion survey, 84% of landlords said payment problems were one of their top concerns.
  • According to TransUnion, there is no definitive “good” credit score, and many factors determine creditworthiness. Look beyond just the score to get a better picture of an applicant’s creditworthiness. Take time to read the applicant’s credit report, which has information about open trades, debt levels, and other important financial information.
• Do they have a relevant criminal background?
  • A SmartMove user survey showed that 60% of landlords strongly and somewhat agreed that criminal history is more important than credit history.
  • In 2016, 24% of applicants screened by SmartMove had a criminal hit on their record.
  • A hit on a criminal report might point to issues later. It is important to review this information in order to ensure safety for your property and for other tenants or neighbors

• Do they make enough income to cover the rent?
  • Are they able to afford the rent and average living expenses in your area?
  • A general rule of thumb is to look for an applicant with income that is three times the rent rate
• Do they list any evictions on their application?
  • TransUnion data shows that evicted residents have nearly three times as many prior evictions and rental-related collection records as non-evicted residents.
  • SmartMove data also shows that 8% of SmartMove reports have an eviction record. What’s more? The eviction process could take up to three to four weeks, and cost you an average of $3,500.

Background screening will help landlords to verify that a prospective tenant checks all the boxes and, in some cases, could give the applicant a chance to explain any areas that may be questionable.

Note: You must abide by the rules and regulations of the Fair Housing Act when deciding to deny an applicant, so do your research and consider your reasoning before rejecting a tenant following an in-person or phone conversation.

Conduct a Landlord and Employer Reference Check

After you have conducted your preliminary application review, decide whether or not the applicant is a good fit. If so, use the information provided to continue your screening process.

As a next step, call the applicant’s previous landlord.  The information you uncover may help you better predict how the tenant will behave while residing in your property and may save you the frustration and cost of eviction later on.  

Pro tip:  For good measure, call the applicant’s prior landlord — and the landlord before that one. It could be possible that the previous landlord is incentivized to have a less-than-stellar tenant exit their property. However, an older landlord will not have any incentives either way and may report a more accurate picture of your applicant.

A landlord reference check may provide answers to the following questions:

• How long were the tenants at the indicated address?
• Were they timely with their monthly rent payment?
• Do you have a copy of their rent records?
• Did the tenant give proper notice to vacate or are they breaking their lease?
• Would you rent to them again?
  
  

Along with a landlord reference check, you should contact the prospective tenant’s current employer to make sure your tenant has enough income to cover the rent, costs of living, and any unexpected costs that may arise.

According to TransUnion SmartMove data, the number one concern among independent landlords is the non-payment of rent. Given that evictions can cost a landlord $3,500 on average and could take up to three to four weeks to complete, it pays to ensure applicants will be able to cover the cost of rent each month.

When you have a good sense for the amount of applicant’s total income, calculate their rent-to-income ratio. As a rule of thumb, an applicant who earns three times the rent amount could be viewed as favorable.

If you don’t have the time or cannot collect all of the requisite documents to verify income, then consider using SmartMove’s Income Insights. Income Insights is a feature, only offered by SmartMove, that can save time and effort for a landlord. In a matter of minutes, it allows you to analyze tenant income. It works by comparing credit behavior to applicant self-reported income to determine if further income verification checks are needed.

Properly Perform a Tenant Screening

While the abovementioned steps are essential when vetting tenants, the most important is step is to formally screen your potential tenant with a screening service like TransUnion SmartMove.

Even though you’ve received an array of information from their rental application and reference checks, it’s crucial to get all of the data from a trusted source. This will provide a full picture of your applicant, and help you verify information before signing the lease agreement.

According to SmartMove data, more than 95% of landlords believe tenant screening is beneficial and helps them get a higher-quality tenant into their rental unit.

Proper Tenant Screening Essentials

It is important to uncover as much pertinent information about your potential renter as possible so that you can adequately assess their risk, understand their background, and assess their history of making payments. These key pieces can help you determine if they are a fit for your unit.

We recommend that landlords get:

• A full credit report
• Complete background check
• Eviction history report
• Income Insights report

Note: By no means does a landlord have to accept a tenant just because they conducted a tenant screening. According to the , there are many sensible and legal reasons why you may choose to reject a tenant.

Here are a few examples:

• Bad credit
• Not enough income to pay rent
• Past evictions
• Negative references from prior landlords
• Criminal record

Be sure you’re following regulations when rejecting an applicant. If you’re unsure, consult with legal counsel.

Tenant Screening with SmartMove

Tenant screening with SmartMove can help to give you a well-rounded view of all of the above factors. SmartMove reports provide insight into crucial information about an applicant’s ability to pay rent each month, their criminal background, and the overall risk your prospective tenant presents.

By using a tenant screening service like TransUnion SmartMove, you will receive comprehensive credit, background and criminal, eviction, ResidentScore and Income Insights reports. Unlike traditional background checks, which may take weeks to complete, SmartMove delivers tenant screening reports within minutes. With immediate access to screening tools and reports that are generated within minutes, landlords can make an informed decision and fast-track moving in a tenant that they are comfortable with.

Designed to work hard for independent landlords, SmartMove offers these unique benefits:

• Pick who pays: Unlike other screening tools, you can choose to pay for the cost of tenant screening yourself, or push that cost to your prospective tenant.
• Discover which applicants need additional verification: Using SmartMove’s proprietary Income Insights report, within minutes you’ll know whether or not you will need conduct further verifications about an applicant’s self-reported income information.
• Get more precise rental credit risk scoring: SmartMove's ResidentScore is designed to predict risk specifically for rental outcomes. Built by examining millions of rental outcomes, ResidentScore uses over 200 variables to score potential tenants with more precision than a traditional credit score. In fact, ResidentScore predicts eviction risk 15% better than a generic score in the lower ranges, which can help a landlord better understand applicant risk.

As mentioned, choosing the right tenant is a business decision and you need the correct information to help you make the best possible leasing decision so you can continue generating rental income. When evaluating your applicants, having their ResidentScore helps you better understand the risks.

While learning how to screen tenants for the first time might be intimidating, a service like SmartMove makes the screening process easier for landlords across the country.

• We’ve conducted over 5 million screenings
• 94% of landlords surveyed by SmartMove recommend SmartMove

Armed with the right information and tools, you can find the perfect tenant for your rental property quickly and efficiently. Whether you’re a new or seasoned landlord, it’s crucial to use a tenant screening service like SmartMove to help you make a more informed leasing decision.  

Next Step

SmartMove is used and trusted by +3.7 million landlords and +4.6 million tenants. Sign up now and screen today for great reports, great convenience, and great tenants.

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