Before you put a tenant in your vacancy, be sure to thoroughly screen them. When you have a system in place and you perform your due diligence on ALL applicants, the chances are, you will NOT end up with a deadbeat tenant. Below are seven steps to follow when screening your prospective tenants.
Step One: Have a Written Criteria List for Each Building
Create your written criteria and give it to all applicants at the same time you give them the Application to Rent. This list helps you in two ways:
- It enables the prospective tenant to see your requirements BEFORE they submit an application. If your criteria list states that the applicant cannot have any record of evictions or must have at least a 600 FICO score – chances are, those who do not qualify will not return the application thereby saving you time.
- When followed consistently, your written criteria will keep you out of trouble with Fair Housing and allow you to treat all applicants fairly. (When you make an exception for one – you must make that exception for all.)
A Qualificantion Criteria List (form 100Q) can be found in the forms section of AOA’s website at www.aoausa.com. Simply fill in the blanks to create your building’s requirements for renting and attach it to every application you hand out. (Keep in mind, that you can have different requirements and a separate list for each building you own.)
Step Two: Have the Tenant Complete the Application and Collect the Credit Screening Fee
One of the requirements on your criteria list should be that you receive a fully completed and SIGNED application by the applicant in order to qualify. Please note: you cannot run screening reports – (Credit, criminal, or eviction) without the applicant’s signature.
At the time you accept the application, be sure the applicant has also submitted your required documents, such as pay stubs, a copy of their driver’s license and whatever else you have on your written criteria. Also, collect the credit screening fee in cash, Cashier’s check or Money Order at the same time. Once you have everything you need, you can begin the screening process without having to go back to the applicant or wait for them to get you needed documents.
Step Three: Give Applicant the Application Screening Fee Receipt
California requires you to provide the applicant with a receipt itemizing your credit check and screening fees at the time you accept the application and screening fees. AOA provides the free form #147 for your convenience. Please keep in mind that you should only charge your actual out of pocket costs plus “a reasonable value of time spent” for background checks, personal information and employment verification.($10 at the most). $30 – $50 is common, however; currently, the law in California states that you cannot charge more than $47.72 for each applicant – (this amount changes periodically – usually on an annual basis). Again, check your local laws. Be sure to keep a copy of the receipt for your records.
Step Four: Applicant Screening Checklist
Our goal is to make the screening process as painless as possible for you. Print out or save – the Applicant Screening Package (AOA form 100S) to use for each rental applicant. The screening checklist will guide you through the steps, keep you organized during the process and will serve as a reminder of proper screening procedures and suggestions.
Step Five: Request Credit, Eviction and Criminal Reports
AOA offers several low-cost screening packages available that give you fast, easy and accurate information. Have your tenant pay for a thorough 5-Star Screening Report which includes:
- Two National Eviction Searches
- Instant Nationwide Criminal Search
- Credit Reports from Trans Union and Experian
- An A, B or C rating
- Fico Score
- Public Records
- Civil Judgments
- Social Security Verification
- Consumer Information and Tradelines
- Payment History
- Payment Obligations
- Credit Availability
- Prior Inquiries
- Experian Social Security Number Trace
If the reports that you have run on the applicant are acceptable, move on to step six.
Step Six: Continue the Screening Process
Using the Applicant Screening Checklist as a guide, thoroughly check out your applicant. This includes:
- Employment verification
- Banking information
- Previous landlords
Once completed, if you received favorable information and the applicant meets all of your qualifications, you are ready to rent to your new tenants!
Step Seven: Applicant Rejection Must Be in Writing
If you choose to reject your applicant, you are required by the Fair Credit Reporting Act to give them an “adverse action notice”. AOA provides a free form #140, the Tenant Rejection Notice for this purpose. If you do not rent to them because of negative information received from credit reports, you must tell them the name of the agency that reported the negative or insufficient information and their right to obtain a copy of their report. DO NOT EXPLAIN THE REASON FOR THE REJECTION – just give them the completed rejection notice. This notice informs them who to call, provides phone numbers, other information and a copy of their rights. It is recommended to keep rental applications upon rejection for seven years.
Always call AOA for low-cost screening of your prospective tenants!