July 03, 2018
Tenant Credit Checks: What You Should Know
In today’s competitive market, prospective renters have more choice than ever. To reduce vacancy rates, you need to quickly convert leads to qualified tenants. Yet, we’ve all heard (and some may have experienced!) the horror stories of bad residents who stop paying rent, and to add insult to injury, go on to ruin the property. Performing tenant credit checks (along with reference and employment checks) gives you the necessary info you need to know about a potential tenant BEFORE you rent to them. Yet, to ensure you have high-quality renters, the tenant credit check process needs to be as seamless and fast as possible.
Challenge: Slow Approval Times
Typical credit checks can take anywhere from an hour to a day. When a credit check is requested the landlord provides the tenant’s name, date of birth, address, and, only if they’ve offered it, their social security number. The property management firm pays a fee to receive information quickly, or wait a day for the report to come back.
But what often slows down a credit check even more is incorrect or missing data from the prospect. Often it means emailing and sometimes even faxing information back and forth. These precious hours can make the difference between getting your prospect to sign on the dotted line, or walking away to another rental.
Solution: Improve the Application-to-Approval Process
Capture information once by putting technology to work for you. Implementing an online application and credit approval system increases the prospect-to-resident ratio. With Property Vista’s application and tenant screening modules, prospective renters and co-signers move quickly and easily through the application. This considerably diminishes the time from application to approval. Typically, property management professionals who use Property Vista’s solution see a 35% increase in approved applications.
Challenge: Too Often Credit Checks Don’t Tell the Whole Story
In many cases, the property management firm will pull the prospect’s FICO credit score. This number is a result of a propriety formula that is based on payment history, debt burden, length of credit history, type of credit used and number of credit inquiries – along with a few other factors. It results in a score that ranges from 300 to 900. An applicant scoring 700 and above is considered to have good credit.
But what does the FICO number mean? Obviously, paying your bills on time plays a major role. However, oddly, the credit firm can assign a better score to people who have higher credit limits and only pay the minimum payment than those who pay their bills in full. A FICO credit score doesn’t offer a complete picture. Consider this: Some people have never missed a rent payment but are frequently late paying bills. Lastly, FICO has been criticized as it is easy to game, and not a good predictor of risk.
Solution: Conduct Better Screening
You need to dig deeper than a number between 300 and 900. Property Vista offers a comprehensive solution to assessing applicant suitability. It includes an integrated credit check, as well as a state-of-the-art algorithm to analyze more than 30 points of interest, such as credit score and debt, income and required rent, and a probability analysis.
Here at Property Vista, all our solutions help property managers improve the leasing process while improving the customer experience. Learn more about our solutions for online applications and tenant credit checks, or check out our pricing.