Creating a Tenant Scoring System 

Tenant screening is arguably one of the top factors that make or break a rental business. It’s critical for landlords to carefully evaluate applicants based on well thought-out criteria and defined standards. But what do those criteria and standards look like?  

Naturally, what makes a prospective tenant a good fit for a rental property will vary from landlord to landlord. The most important thing is that your tenant screening process is consistent for every applicant. Otherwise, you risk fair housing accusations, fines, and even worse legal trouble. 

A tenant scoring system can help you keep screening consistent, fair, and straightforward. Tenant scoring systems involve assigning point values to various tenant screening criteria (like credit score, income level, etc.) as a method of objectively comparing rental applicants. Even if you use a tenant screening service, implementing a scoring system on top of it can help you compare otherwise similarly qualified candidates. 

Why is Tenant Screening Important? 

The biggest benefit to tenant screening is that you are more likely to avoid the costs of evicting a tenant, which can be significant. By taking a careful look at a tenant’s income, credit score, and eviction history, you can get a better understanding of who is likely to be able to pay and who may cause future problems with late or absent payments. You will find these sections—income level, employment information, credit score, and recent bankruptcy—included in our tenant scoring system template.  

All the above information about a tenant can be acquired by obtaining a tenant screening report (including a credit report, rental history, and criminal records) and having the tenant complete a rental application with tenant screening questions. To familiarize yourself further with what should go into an effective tenant application, read our article on the subject here.  

A thorough rental application also makes it more likely that you will end up with high-quality tenants who ensure future rental property income and are less likely to cause issues that require maintenance or intervention of any kind.  

Tenant Screening Disclaimers 

Based on everything outlined thus far in this article, it should be clear that tenant screening is a necessary part of running your rental business. However, there are certain protections and restrictions that you should be aware of as you undergo this process. Let’s look at a few below. 

Fair Housing Laws 

The last thing that you want to have happen as the owner of a rental business is to face a fair housing violation. Knowing how to avoid violations is critical. The Federal Fair Housing Act, passed in 1968, outlaws any form of discrimination in the selection of prospective property owners or tenants. The act is explicit about the prohibition of discrimination on the basis of race, color, religion, national origin, sex, familial status, and disability. Additionally, the federal Fair Credit Reporting Act establishes guidelines for the use of credit information during the rental screening of prospective tenants, such as landlords’ responsibility to send adverse action notices when denying a tenant based on their credit screening report. 

On top of these protections, certain states add their own protections under the law. These can include protection from discrimination based on sexual orientation, gender identity, age, source of income, and marital status, among others. You cannot consider or ask about any of these characteristics during the rental application or tenant screening process if they are protected classes in your state. 

Criminal Background Checks 

Each state has different protections and regulations regarding the use of criminal background check information and whether it may be used as grounds to deny a tenant. For instance, some states prohibit the use of criminal histories in housing decisions altogether, while other states allow the use of convictions but not misdemeanors or arrests. We cannot emphasize enough the importance of researching local and state regulations for the use of criminal background check information, especially if you plan on using tenant screening services, which may or may not report information according to your state’s laws. Be sure to research how these tenant screening reports are generated or request assistance from a lawyer to help you stay compliant with the law. 

Conclusion 

As we have hopefully made very clear in this article, the important question is not whether to conduct thorough tenant screening, but how to ensure that it is as complete and fair as possible so that you end up with the best tenants for your rental properties. Innago’s tenant scoring template spreadsheet will allow you to visualize various aspects of the tenant screening process and compare applicants objectively, allowing you to make fair judgments and decisions for your rental investments.