Step-by-Step Tenant Screening Guide

Tenant screening is a crucial process for landlords and property managers. It helps ensure that the tenants who move into your property are reliable, financially responsible, and likely to adhere to the terms of the lease. Proper tenant screening can save you from potential headaches down the road, such as late payments, property damage, or even eviction processes. By thoroughly evaluating prospective tenants, you can maintain a safe and stable living environment for all residents and protect your investment.
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Before we get started, let’s talk about Fair Housing Laws

When conducting tenant screenings, it's essential to comply with fair housing laws. These laws are designed to protect applicants from discrimination based on race, color, national origin, religion, sex, familial status, or disability. Violating these laws can result in severe penalties and legal repercussions. Therefore, ensure that your screening process is consistent, transparent, and free from any discriminatory practices. Always apply the same criteria to all applicants and document your decision-making process to avoid any allegations of bias.
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Steps to Screen Tenants

1. Set Screening Criteria and Requirements‍

The first step in tenant screening is to establish minimum applicant requirements. These criteria will help you filter out unsuitable candidates right from the start.
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Some examples of criteria include…
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• Income: Most landlords want to ensure that the applicant's income is sufficient to cover the rent. A common rule of thumb is that the rent should not exceed 30% of the tenant's monthly income.
• Credit Score: A good credit score indicates financial responsibility. Look for scores that demonstrate a history of timely payments and low debt levels.
• Employment History: Stable employment history suggests that the tenant has a reliable source of income. Verify the length of their current employment and any gaps in their work history.
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Set benchmarks that are realistic and attainable for your target market. For example, if your property is in a high-demand area, you might require higher credit scores and income levels. However, be flexible enough to consider applicants who may have extenuating circumstances but still demonstrate potential as reliable tenants.
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2. Require a Completed Rental Application‍

A comprehensive rental application is essential for gathering the necessary information about prospective tenants.
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Information to Collect (Employment, Income, Previous Addresses, References)
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Ask applicants to provide:
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• Employment Information: Current job title, employer's name, and contact information.
• Income: Monthly or annual income, including any additional sources of income.
• Previous Addresses: Rental history for the past few years, including landlord contact information.
• References: Personal and professional references who can vouch for the applicant's character and reliability.
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3. Run Credit, Rental History, and Background Check

After collecting the rental application, the next step is to verify the information through various checks.
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Importance of Credit Scores and Background Checks
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• Credit Scores: Assess the tenant's financial health and ability to pay rent on time. Look for patterns of late payments, high debt-to-income ratios, or recent bankruptcies.
• Background Checks: Ensure that the applicant has no criminal history that could pose a risk to your property or other tenants. This includes checking for any past evictions.
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Online Tenant Screening Services
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Utilize online tenant screening services to streamline the process. These services can provide comprehensive reports that include credit scores, background checks, and rental history.
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Clara is a powerful digital rental application and screening platform that delivers a seamless experience for both renters and landlords. It consolidates and secures application information, empowering renters to find their ideal homes and landlords to find their ideal tenants.
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With Clara, you can confidently create and share an online application with potential renters. Renters can build a robust profile detailing their rental history, employment, references, lease preferences, and more. Applications adhere to Fair Housing Compliance, ensuring a consistent and equitable process.
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Clara provides a comprehensive TransUnion credit report, featuring a renter's credit score, total credit lines, collections, and more. It performs an eviction search for past court actions, unlawful detainers, and monetary judgments, as well as a thorough criminal history search across more than 200 million records at both national and state levels. Each background check inspects for felonies, sex offenses, wants, warrants, and more.
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Clara partners with Plaid, an advanced security and encryption tool, to verify identification documents, phone numbers, names, dates of birth, ID numbers, and more. With Plaid's income verification, you can easily access employer and income data via payroll providers and documents like pay stubs, W2s, and 1099s.
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4. Obtain References from Current Employer and Landlord

Contacting references can provide additional insights into the applicant's reliability and suitability as a tenant.
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Verifying Income Information and Gathering Additional Insights
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• Current Employer: Confirm employment status, income, and job stability. This helps ensure that the applicant can afford the rent.
• Previous Landlord: Inquire about the applicant's rental history, including any late payments, property damage, or disputes. A positive reference from a previous landlord is a good indicator of a responsible tenant.
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5. Review All Applicants

Once you have gathered all the necessary information, it's time to review the applicants and make a final decision.
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Objective Criteria for Final Decision‍

Evaluate each applicant against your established criteria. Focus on objective factors such as income, credit score, employment history, and references. This helps ensure that your decision is based on factual information rather than personal biases.
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Avoiding Subjective Biases

Be mindful of subjective biases that could influence your decision. Stick to the objective criteria and ensure that all applicants are evaluated equally. This not only helps you comply with fair housing laws but also promotes a fair and transparent screening process.
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Tenant screening is a critical step in the rental process that helps ensure you select reliable and responsible tenants. By following the steps outlined in this guide and adhering to fair housing laws, you can protect your property, maintain a positive living environment, and avoid potential legal issues. Remember, a thorough and consistent screening process is key to finding the best tenants for your rental property.
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