RentGrade

What is RentGrade and why does it matter?

A RentGrade is a tenant risk solution that predicts the probability that a tenant will pay their rent on time and fulfill the financial obligations of their lease. RentGrade allows landlords to make a decision quickly using the same powerful tools that the pros used, but packaged into an easy to understand letter grade.

Smaller landlords cannot access tenant credit scores without a financial audit, and a site inspection from one of the credit bureaus. RentScreener has already passed all compliance, and we use our standing with the bureaus to obtain this information and pass it on to you in the form or a RentGrade. Each RentGrade is based on the tenant screening policies of hundreds of property managers nationwide. Here is what each RentGrade means:

Make a more informed decision on a rental applicant by inviting them to apply online. We will screen the applicant and provide you with a RentGrade.

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So, what is a RentGrade?

RentGrade is a risk measurement score that tells you the likelihood of a tenant to default on rent.

Factors that comprise the RentGrade

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Screening Issues

  • There are many factors to consider when viewing application data.
  • Landlords must follow the Federal Fair Credit Reporting Act.
  • Small landlords cannot view credit information without credit bureau approval.
  • Credit bureaus are not authorized to release information to anyone who has not gone through compliance.
  • Restrictions make it hard for small businesses and home offices to obtain the necessary information to make informed rental decisions.
  • Bureaus will not review compliance worthiness for landlords with less than 100 units under management.

A Unique Approach

  • RentScreener has already passed compliance so you don't have to.
  • RentScreener is designed to allow even the smallest investor to screen an applicant online.
  • RentScreener allows landlords to be unbiased and objective in their screening process.
  • RentScreener uses the most advanced resident scoring model to predict an applicant's probability of paying their rent on time.
  • RentGrade allows landlords to make more informed decisions without violating applicants privacy.

RentGrades Defined

There are a very complex set of factors that make up a RentGrade. The below definitions help to define the individual RentGrades but may not include all deciding factors.

RentGrade of A

Very Low Risk of default (<1.1%)

Definition:
A RentGrade of A typically represents a credit score of higher than 700 with a rent-to-income ratio typically 3 to 1 or higher.

What does this mean?
Congratulations, you have found a fantastic, low-risk tenant. This tenant has a great credit score and has demonstrated a track record of paying bills on time and as agreed. This is the best grade that we give to any of our potential tenants. Every property management company would be eager to rent to this tenant under the most competitive terms for as long of a lease as possible.

Next Steps:
Sign this tenant on as long of a lease as possible and ask for your standard security deposit. This tenant is in demand and has some room to negotiate on price. Only about 1 in 8 tenants receives an A, so don’t let them get away.

Action Most Landlords Take:
Based on TransUnion’s resident score, this applicant has greater than 99% probability of paying their rent on-time. All professional property management companies would rent to this tenant under their least restrictive conditions.

RentGrade of B

Low Risk of default (1.1% - 2.7%)

Definition:
A RentGrade of B typically represents a credit score of 600-699 with a rent-to-income ratio 3 to 1 or higher.

What does this mean?
Congratulations, you have found a good, low-risk tenant. This tenant has a good credit score and has demonstrated a track record of paying most of their bills on time and as agreed. There have been a few minor issues on their credit report, or they a very limited credit history. Their probability of paying their rent on time is very high. Most property management companies would rent to this tenant, but they might require some additional financial consideration such as a bigger security deposit.

Next Steps:
We recommend accepting this tenant for residency to one year lease. Since they have experienced some financial difficulty in their past, we recommend increasing the security deposit to 150-200% of what you would charge a better qualified applicant. If the tenant pays on time and is a good tenant, then you can extend their lease after the first year.

Action Most Landlords Take:
Based on TransUnion’s resident score, this applicant has a greater than 97.8% probability of paying their rent on-time. Most professional property management companies would rent to this tenant. Some companies would require additional deposit / rent.

RentGrade of C

Moderate Risk of default (2.8% - 5%)

Definition:
A RentGrade of C typically represents a credit score of 500-599 with a rent-to-income ratio 3 to 1 or higher, or a 600-699 credit score with a rent-to-income ratio 1 to 2.9.

What does this mean?
A RentGrade of C is an average tenant. They are not necessarily good or bad, and they have experienced some significant financial difficulty in their past, or have very little or no credit history. Their probability of paying their rent on time is lower than a B or A. Many property management companies would rent to this tenant, but almost all of them would require additional financial consideration of at least a double security deposit.

Next Steps:
If you want to accept this tenant, we recommend taking a considerably larger security deposit in case the tenant runs in to financial trouble during the lease. Since this tenant has a rocky payment history, we recommend taking a security deposit of at least 200-300% of your normal deposit. If you have more qualified applicants, and your local laws permit, you might want to wait for a better, more qualified applicant.

Action Most Landlords Take:
Based on TransUnion’s resident score, this applicant has greater than 95% probability of paying their rent on-time. Most professional property management companies would rent to this tenant, however almost all would require additional deposit/rent and/or a co-signer.

RentGrade of F

High Risk of default (>5%)

Definition:
A RentGrade of F typically represents a credit score of <500 with a rent-to-income ratio 3 to 1 or higher, or a 500-599 credit score with a rent-to-income ratio 1 to 2.9.

What does this mean?
A RentGrade of F signifies a history of financial default, or absolutely no credit history. The risk of this tenant defaulting on their lease is very high. Most property management companies would not rent to this tenant. Some would, but would require a co-signor AND significant additional financial consideration such as a much larger security deposit AND some pre-paid rent.

Next Steps:
We recommend waiting for a better tenant. If you must rent to this applicant, make sure you get a financially sound co-signor and a significant amount of pre-paid rent and a security deposit of at least 3 months rent.

Action Most Landlords Take:
Based on TransUnion’s resident score, this applicant has a greater than 11% probability of defaulting on their rent. Most professional property management companies would NOT rent to this tenant without significant additional financial considerations. Additional considerations include significantly higher deposit / rent and/or requiring a co-signer.

Disclaimers and Fine Print

Criminal Disclaimer:
We utilize TransUnion’s national criminal records search to find criminal activity. [Read TransUnion's disclaimer] We do not make any recommendation on the severity of any crime. Since this is public record we encourage you to ask the applicant about any criminal activity and verify that with the local authorities.

Eviction Disclaimer:
We recommend that you never rent to a tenant that has already gone through an eviction. This is the clearest indicator that a tenant is likely to default.



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