How to Create a Tenant Scoring System
January 4, 2021
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Creating A Tenant Scoring System
There’s no doubt that tenant screening is a crucial part of any property manager’s application process. The benefits of tenant screening include finding higher quality tenants, avoiding bad tenants, reducing turnover, and minimizing or even eliminating evictions.
Choosing the best applicant can be hard when you’re reviewing all of their information on an application. To help you break it down, categorize the information, and better understand which applicant will make for the most reliable tenant, you should create a tenant scoring system.
Tenant scoring systems allow you to rank tenants on criteria that matters most to you, as well as make an objective decision based on the applicable facts of a prospective tenant. This is particularly useful when two applicants qualify, but you need to choose only one. Scoring systems also expedite the process, making the decision quicker and easier. Perhaps most importantly, they allow you to avoid Fair Housing lawsuits with written and documented criteria.
In order to have an effective and useful scoring system, you should adhere to the following steps:
- Establish your primary goals.
- Consider which factors will enable you to achieve your goals.
- Create your comprehensive scoring sheet.
- Bonus: Have an attorney review your scoring system.
Below, we go over exactly what each of these steps entail. You’ll feel better prepared the next time you have to choose a tenant to fill your vacancy.
Step 1: Establish your Primary Goals
Figuring out what your primary goals are enables you to begin laying out criteria purposefully. You’ll know that the factors in your scoring system are useful and aimed at meeting your goals.
Typically, you will have two primary goals with your scoring criteria:
- Comply with Fair Housing regulations and protect yourself from discrimination lawsuits.
- Choose the most qualified applicant to fill your unit.
It’s necessary to break down goal 2 a little further. The most qualified tenant will:
- Pay rent in the full amount, on time, every month.
- Follow the terms of their lease agreement.
- Respect other tenants and your property, causing no excessive damage.
Step 2: Consider Which Factors will Enable you to Achieve your Goals
Now it’s time to draft up the criteria you’ll want to include in your scoring system. To keep these factors on target, you should lay out specific criteria that will allow you to achieve each of your goals.
Goal #1: Comply with Fair Housing regulations and protect yourself from discrimination lawsuits.
The Fair Housing Act ensures equal housing opportunity for all renters. It forbids discrimination based on protected classes such as race, color, religion, sex, familial status, handicap, or national origin.
As a property manager, you’re legally allowed to require an applicant to provide proof of identity and verify employment and income. You’re also able to review an applicant’s screening reports – rental history, credit check, and criminal history in order to find the most qualified tenant.
If you create standardized scoring criteria based on this information and apply the same criteria equally to all applicants, you should be in compliance with Fair Housing laws.
Goal #2: Choose the most qualified applicant to fill your unit.
When drafting the criteria to include in your scoring system, you should come up with legal ways that you can ensure an applicant will be a qualified tenant. Below, we go over some of the ways you can go about doing so.
1. Will pay rent in the full amount, on time, every month.
The best ways to ensure that a tenant will make regular payments in accordance with their lease, you should verify income and employment, review their credit report, and contact previous landlords.
Objective criteria to consider when discerning whether a tenant will pay on time:
- The applicant has a monthly income that is 3x the monthly rent.
- The applicant has stable, verifiable employment.
- The applicant does not have any considerable outstanding debts or collections.
- The applicant’s credit report demonstrates financial responsibility.
- The applicant has a positive rental history.
- The applicant has a history of paying rent on time.
- The applicant does not have a history of evictions due to non-payment of rent.
- The applicant has not been taken to collections for non-payment of rent.
2. Will follow the terms of their lease agreement.
In order to ensure that a tenant will abide by the terms laid out in their lease, you should evaluate their criminal history, public records, credit report, and landlord references.
Objective factors to consider when discerning whether a tenant will follow the terms of their lease:
- The applicant has not been previously convicted of crimes considered harmful to people or property.
- The applicant does not have a history of lease violations.
- The applicant does not have a history of noise complaints.
- The applicant does not have a history of evictions due to lease violations.
- The applicant’s landlord references would rent to her again.
- The applicant does not falsify any application information.
- The applicant pays bills on time, demonstrating responsibility.
3. Will respect other tenants and your property, causing no excessive damage.
This one’s a little trickier to guarantee, but the best way to know that an applicant will respect their fellow tenants and your property, you should check with their previous landlords or property managers.
Objective criteria to consider when discerning whether a tenant will respect other tenants and your property:
- The applicant was refunded the full security deposit.
- The applicant reported maintenance issues immediately.
- The applicant did not cause damage exceeding the security deposit.
Step 3: Create your Comprehensive Tenant Scoring Sheet
Now that you have all of the criteria laid out, it’s important to create an organized scoring sheet. The more organized your scoring sheet is, the quicker it will be to fill out and pick an applicant.
You should think of your scoring sheet as a checklist. Compare the information from an applicant’s screening reports to the criteria on your scoring sheet. For every criteria they meet, they get a point. The tenant with the most points at the end will be your most qualified applicant.
Your scoring sheet can be filled out online or on a printed sheet, however you prefer. Either way, you should always keep secure records of your scoring sheets for each applicant, just in case they make discrimination claims against your application process.
Bonus: Have an Attorney Review your Tenant Scoring System
If you want to be extra sure that you’re safe in case of a Fair Housing lawsuit, you should have an attorney who is familiar with landlord-tenant laws in your area review your scoring system. This way, you’ll be certain it complies with local, state, and federal regulations.
Regardless, taking the first step and establishing a scoring system is most important. Spend some time examining your process and ensuring you’ve got the right setup to find the best tenants. Great tenant screening is your first defense against bad tenants, so take the process as seriously as you would an eviction.