Due to changes in credit reporting rules, civil judgements like landlord debt and evictions are no longer included on credit reports. I have been checking local court websites for these things since I first started managing rentals (for entirely different reasons). I noticed some years ago that often I found judgments that didn’t show up on the reports normally pulled by property management software like Appfolio.
As a result of my long-standing policy, this doesn’t really affect how we screen rental applications at Strawberry Property Management. We use a credit and background screening service that does national eviction checks. We will keep manually checking the local court websites, in addition to running a comprehensive credit and background report.
Eviction history and money owed to previous landlords is a huge indicator of risk. We do not accept rental applications when we find these financial issues in our screening:
- unresolved landlord debt
- unpaid utility bills
- unpaid payday loans
- evictions within the past 5 years
- currently active issues like behind on vehicle payments
We use other criteria as well, but these basic issues are hard-limit “decline” items.
Unpaid housing bills, evictions and risk
These items can indicate a tenant may be a high risk for leaving unpaid rent, or even property damage. In our own experience, we have found that unpaid rent often goes hand in hand with excessive cleaning issues and/or property damage. Cleaning up and repairing damages left by a bad tenant can be costly. Chances of collecting on these expenses are slim, especially since landlord debt may not ever show up on a tenant’s credit report. Therefore, we make every effort to weed out these potential problems from the beginning. We do not like having to evict people from a home (though we will do so without hesitation if necessary).
In addition to our extensive tenant screening efforts, we require increased security deposits under certain circumstances. This can further help mitigate risk, by requiring a renter to pay a higher deposit up front. Our own data shows that tenants who pay higher security deposits tend to pay their rent and take reasonable care of rental property. In a nutshell, they have a financial incentive to hold up their end of the rental agreement.
Successful application screening
I am proud to say that our tenant screening efforts have been paying off for our landlord clients. We have about 98% on-time rent payments. In my career so far, I’ve only had to evict one tenant that I placed. As a property manager, this has been one of my main areas of focus. Good tenant screening may be the best way to reduce costs and maximize profitability of a rental property.