Tenant screening is a process used primarily by residential landlords and property managers to evaluate prospective tenants. The purpose is to assess the likelihood the tenant will fulfill the terms of the lease or rental agreement and will also take great care of the rental property in question. The process culminates in a decision as to whether to approve the applicant, approve the applicant conditionally (such as requiring an increased deposit or cosigner) or deny tenancy. Source: Wikipedia
Successful tenant screening is among the most important items that a property manager or landlord can do to ensure the success of investment in rental property. Cash flow (rent) fuels every investment in rental property. It covers mortgages, property maintenance, taxes, insurance and modernization of the property. Effectively placing quality tenants in rental property ensures that these expenses continue to get paid. Vacancy on a single family rental property is costly, but an occupied property with a non-paying tenant is disastrous.
There are two critical factors that a tenant must do to increase return on investment for a rental property: fulfill the terms of the lease (Pay rent on time), and care for the property (Cause limited financial damage to the property). A property manager or landlord must do as much diligence as possible to increase the odds that these two items will take place.
Luckily for landlords and property managers, the same tools employed by most lending institutions are available in some form to property managers and landlords. These tools can help answer whether or not a tenant is likely to pay their rent on time. A lease is basically an extension of credit to a tenant. A more difficult task for landlords is to determine whether or not a tenant will cause an acceptable amount of damage to the property.
TransUnion’s scoring model (ResidentScore) is created specifically for the Multi-Family industry. This means it is predictive of bad outcomes like delinquencies, bad debt, skips, and evictions. We update our scoring model every couple of years since market conditions change.
Similar to FICO or Vantage, TransUnion’s ResidentScore is in a range of 350 to 850. While ResidentScore will not completely align with the more common FICO or Vantage score, there will naturally be some correlation.