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Tenant Screening Criteria Establish the criteria and define the reasonableness of those criteria. Be prepared to apply them equally at all times. The idea behind a good policy is that you are objective and the decision is made by established business rules. Subjectivity in the rental screening process is where Fair Housing rules can appear to be breached. What is good credit Define it using the elements of credit and the credit score. The credit reporting warehouses have average scores by region. You can use the average FICO score for your area as a benchmark or guideline. Elements of credit: How do you define bad credit? Generally by timely payments to credit cards or other debts. How many 30 day/60 day/90day late payments are acceptable? Should you accept any 60 or 90 day late payments? Too many could be a sign of irresponsibility. Consider your parameters regarding ability or willingness to pay and create a business rule you never break. Consider the FICO score: The major credit reporting agencies have information regarding what is average score by region or nationally. According to the Experian web site the national average as of this writing is 678. You may begin here to attach meaning to the number for your own screening process. Bankruptcies: Should you accept any at all? What if it was many years ago, if so how far back would be acceptable? Generally bankruptcies beyond 7 years are not reported. Evictions: Should you accept anyone who has been evicted? No credit history or social security number: Is there an age in which it seems reasonable to have little or no history? Some new residents will not have a credit history in this country. Would an in-state guarantors promise to pay solve your problem? Income: Consider how you will handle gross income as a multiple of rent. What is the multiple of income to rent or the income to rent ratio you will use. Should income be 2.5 times the cost of rent or 3 times rent? Should you combine the gross income of two earners? This is generally accepted solution, but what if one tenant has most of the income and thats the one that moves out, leaving a tenant on the lease under capitalized and with little ability to pay the rent? These issues get tricky and a good apartment association can give you tips. Proof of income: Is it good enough to call the employer with the number given of the application(s)? Recent pay stubs should be used to corroborate the phone call to a business owner. The Guarantor: Should the Guarantor reside in the state where the tenancy is? Sources of income: All sources of income are treated equally. The income may come from the work place, Federal programs, passive investment income or trust income. There is no legal distinction that can be made. These rules may vary in your state. References: Be sure to ask for prior landlords and call them. The present landlord may not be willing to tell you if the applicant is a problem tenant. The desire to see the tenant go may over ride any need to be completely honest. The prior reference is very critical. If an applicant was a problem once it's likely that you may also have problems. Be sure to use a reputable Credit Reporting Agency. REsourced from www.yourpropertypath.com You may republish this article, as long as you do not edit and you agree to preserve all links to the author and www.yourpropertypath.com
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