John Oliver recently ripped into tenant screening services on an episode of his HBO special “Last Week Tonight.”
In this post we’re going to share that video (scroll down a little bit but know it’s not safe for work) along with 5 things you should know about tenant screening services.
At RentPrep we’re a tenant screening service with a team of FCRA Certified Screeners to run reports and handle customer support. However, for the first three years I handled customer service calls and was able to get quite a bit of perspective from our clients and other landlords. They let us know what they liked and what they didn’t care for when it comes to a tenant screening service.
When breaking down the 5 most common problems, it’s important to understand that if there is one universal truth it’s this; there are different strokes for different folks.
In other words, there is not one perfect solution and opinions vary greatly from one landlord to another and that’s why there are several factors to consider when deciding between tenant screening services.
5 Things You Should Know About Tenant Screening Services
|1. Instant vs. Hand-Compiled Screening Services||Know the difference between the two and understand what makes sense for you.||Instant vs. Hand-Compiled Link|
|2. Compliance and the FCRA||Know what data you can and can’t use in a report||Compliance|
|3. Tenant Involvement||Services differ with tenant involvement. Know your options.||Tenant Involvement|
|4. Wrong Information||Missing eviction data and wrong information are common issues.||Screening Services|
|5. Tenant Services Can Be Expensive||Know what you’re paying for and how not to overspend.||Screening Costs|
#1 Princeton Study: The Ugly Truth About Tenant Screening Services
In the video I mention this Princeton Study that reveals our illogical nature to choose instant gratification over logical decision making.
Here’s the two questions posed in that study:
People overwhelmingly pick option “A” in scenario #1 and option “D” in scenario #2.
This seems illogical because if you wait one more day (in both scenarios) you’re rewarded with one more dollar.
The reason people aren’t willing to wait the extra day in scenario #1 is because instant gratification is involved in the decision making process.
Professor David Laibson, of Harvard University says this about these findings…
Our emotional brain wants to max out the credit card, order dessert and smoke a cigarette. Our logical brain knows we should save for retirement, go for a jog and quit smoking.
Here’s why this is a big problem when it comes to tenant screening companies
Most tenant screening services are built to maximize profits. This means satisfying the emotional brain that wants immediate gratification.
This business model works because people don’t have a frame of reference for what goes into a tenant screening report.
For example, if you went invited to a Thanksgiving dinner, and were presented these two option, which would you choose?
Most people would be willing to wait for option B because they have a frame of reference when it comes to the quality of tv dinners vs. homemade dinners.
It’s different when it comes to selecting a tenant screening company…
… many services offer instant background checks because landlords don’t have a frame of reference for background checks and will choose the instant service because it appeals strongly to the part of the brain that wants to max out the credit cards.
A Frame of Reference for Tenant Screening Reports:
Instant background services are nothing more than software platforms that ping databases to copy/paste information into a report quicker than you can say “tv dinner.”
There are two major downsides to an instant background report
- Some databases don’t allow for instantaneous searches
- There are errors and false positive in every database
If you go with an instant solution, you’re report is created with less resources and less checks and balances in place.
Basically, some telling data is omitted and other false data is included because there isn’t a set of eyes to double check the work.
If you’re okay with some cussing… this video from John Oliver is pretty accurate when it comes to credit reports and the errors that happen with them.
At the 6:15 mark of the video they discuss how a tenant applicant was wrongfully accused of being a terrorist. This happens because databases have errors and if no one spot checks the information, those errors go on the credit report and/or background check.
Hand-Compiled Reports Are Like Thanksgiving Dinner
We can’t speak for every service, but here at RentPrep we take about an hour during business hours to turn around a report.
Just like thanksgiving dinner you’re going to have to wait for better quality.
The reason is we’re manually accessing databases, hand-compiling reports, and fact checking the data for compliance.
The compliance aspect of a background report is extremely important. That’s why it is #2 on our list.
There are laws laid out in the Fair Credit Reporting Act (FCRA) to highlight the rights of a person who is having a background check run on them.
In the case of tenant screening, the FCRA protects the rights of the tenant applicant.
The FCRA link above has two main sections I’d like to highlight.
FCRA- Disputing inaccuracies:
The image above is stating that the tenant applicant has the right to dispute what they believe are inaccuracies on their report.
This is a compounding problem when it comes to companies that only provide instant background searches.
That’s because there is bound to be more inaccuracies reported on the original background report AND your tenant is going to have trouble finding someone to fix the inaccurate information.
If you call a tenant screening service and you can’t get someone on the phone easily… neither can your recently denied tenant applicant.
That means they’re going to be barking up your tree.
Pro Tip: Research your available tenant screening services and see if they have a phone number readily available. Try even calling it and see what happens. This will be a good indicator of what their customer support is like.
Other things to be aware of when it comes to the FCRA and screening tenant applicants.
You can see this highlighted bullet point (above) on page two of the FCRA summary.
This is important because the large majority of tenant screening services do not use FCRA Certified Screeners to run your background report.
When it comes to tenant screening, the “negative information” many times refers to evictions.
By law, you can’t use an eviction from eight years ago as a reason to why you deny a tenant applicant.
This is why we hire and train FCRA Certified Screeners to only include reportable data in a tenant background report.
Many landlords want to know everything possible about their applicant but we advise these landlords to stay compliant with the FCRA and here is why…
The second to last bullet point states that a consumer reporting agency (tenant screening services)… or a furnisher of information (a landlord) can be sued in state or federal court for violating the FCRA.
Compliance within the FCRA with your screening is very important for the screening service AND the landlord.
Pro Tip: If you’re searching for “tenant screening services” on Google, try amending your search to something like “FCRA tenant screening services” – Make sure the services that you check out use FCRA Certified Screeners
This topic is an excellent example of, “different strokes for different folks” that I mentioned at the beginning of this post.
That’s because some landlords don’t mind the tenant being involved in the screening process while others avoid it completely.
What does “tenant involvement” mean?
Some services (such as SmartMove by Transunion) require that the landlord provide the tenant applicant’s email address.
At that point, the applicant is sent an email with a link to be taken through a process to provide their personal information, verify their identity, and pay for the report.
Here’s a screenshot of what the three step process looks like on the tenant applicant’s end:
This is an added hurdle that is not part of the tenant screening process with a “zero tenant involvement” service.
At RentPrep we have four different screening packages and three are zero tenant involvement (Basic, Pro, and Platinum) and the fourth does require tenant involvement (SmartMove).
We’ve found from our data that about 70% of requested SmartMove reports are actually completed.
This means 30% of applicants don’t take the necessary steps to complete the background report.
There are many reasons such as spam folders, applicant laziness, or perhaps they don’t have easy access to a computer with internet.
Some landlords don’t like slowing the process down by involving the tenant. They’ll charge an application fee and then run the reports themselves without tenant involvement.
Other landlords see the 30% as a sign. They don’t mind the tenant being involved because if they can’t complete the background check they might not be a good tenant anyways.
It’s really up to your preference. That is part of the reason we added the SmartMove product to our available packages.
Eviction data is the most telling data in any tenant background check.
The reason being is that the first eviction is the scariest for the tenant.
The second eviction is kind of like walking through a haunted house for the second time.
It’s way less scary going through a second eviction because the fear of the unknown has been removed.
Just look at this data from Transunion on previously evicted tenants.
Source – MySmartMove
The chances of a previously evicted renter to go through another eviction are almost three times higher than that of a renter who hasn’t been evicted before.
There’s a few problems I see with some tenant screening services when it comes to eviction data.
Let’s call them a red flag…
The first red flag is an easy one to spot. Some tenant screening services don’t include eviction data in their basic packages.
We believe the most important data should be included in the most basic level of the report. Any tenant screening company not including eviction data on any of the reports does not have the best interest of the landlord in mind.
I don’t want to name names so I’m just sharing a narrow screenshot I found on a tenant screening services pricing page.
This particular service offers four packages. The first shows a red x and doesn’t include eviction data in the lowest package (first red flag). The two middle tier packages do a statewide search and the forth offers a nationwide search.
There a lot of tenant screening services out there and you will see some offer an upsell for nationwide searches. This is our second red flag for two simple reasons:
#1 – People are more transient than ever
It’s not uncommon to get an applicant who has lived outside of your state. You want to make sure you’re seeing if they have a criminal or eviction records in another state.
#2 – The cost isn’t substantial
A tenant screening company has costs associated with accessing the different databases they use to compile your reports. The cost between a statewide eviction search and a national eviction search is pennies more.
However, some screening services use that as an opportunity to make more money. If you see tenant screening packages being split up by statewide and nationwide searches I’d question the integrity of that service unless the difference between packages is only an added dollar.
Many times I see they’ll charge $10 more to add nationwide searches which is a markup of 50-100x depending on the search.
The first two red flags (in my opinion) deal with the integrity of the service.
If you don’t see eviction history or you see it being split up by statewide/nationwide you’re most likely dealing with a service that is either trying to maximize upsell profits or doesn’t even understand how important eviction data is.
Either way… not a good look.
Our third red flag deals more with the capability of the service.
At the risk of sounding redundant, our third red flag goes back to instant vs. hand-compiled background reports.
As mentioned earlier, there are databases that don’t allow “instantaneous data extraction.” In other words, they won’t connect with instant background services and require a person to parse through the data.
Instant eviction databases will show you eviction judgments when a court sides with the landlord in an eviction case. They won’t show you eviction filings.
An eviction filing is different because some tenants will have 13 eviction filings and zero eviction judgments.
This happens many times when a tenant lives in a property that is managed by a professional property management firm.
What we’ve found is many property managers will have a policy in place to begin the eviction process when rent is __ days past due.
The tenant gets that notification and ends up paying the rent including any late fees. Technically, there is an eviction filing with the courts that has been dropped when that tenant pays up the late rent.
Here at RentPrep we find that data valuable because it gives you a clearer picture of your tenant applicant. If they have 13 eviction filings but no eviction judgments you might be looking at an applicant that always pays late on rent.
Instant background searches will not go into this level of detail because it requires a person to hand-compile that data.
Pro Tip: Other advantages of hand-compiled reports include issues with matching names. Sometimes instant services will have issues with common names such as “Stephen White” which is my name.
Other issues with instant services include user error. If you input a SSN wrong by one digit it could reset the entire process or even charge you for a blank report. Our screeners look for that and will call you to get the information correct before running your report.
For the sake of not rewriting too much content, there is an entire article written on the cost of tenant screening.
However, I will briefly summarize why the cost varies so much from one tenant screening company to another.
Don’t Be the Landlord that Paid $900
How did this happen?
The tenant screening company didn’t offer the reports in a package format and therefore the landlord had the option to run a criminal and eviction report on every single state individually.
While this seems like thorough tenant screening, what happened was they were charged for every single state as opposed to just opting for the nationwide search and saved about $890.
For this reason RentPrep only offers national level searches and has a no-hidden-fee policy.
You get what you pay for and only pay when you order.
How Much Do Tenant Screening Reports Cost?
Some tenant screening companies that charge monthly minimums or annual fees are charging whether you need reports or not.
The majority of landlords don’t need to run background reports every week and a monthly or annual fee will be a waste of resources.
It’s usually 2 reports one month, zero the next month, 4 reports the following month, depending on how many rentals the landlord owns.
So be sure you’re not signing yourself up to something that locks you in, or charges for things you don’t need or aren’t even getting.
Look for pay as you go and no annual/monthly fees.
Aside from these common problems landlords have with tenant screening companies, the easiest way to find the best fit for you is to make a few calls.
See what kind of support the tenant screening company has and ask about their services and products.
We already wrote an article on how to choose the best tenant screening company, and it will give you a perfect guide if you’re looking to find the best fit for your particular needs.
How To Save Money On Tenant Screening
Remember, when it comes to tenant screening, one size does not fit all but we’d be happy if you gave RentPrep a try.
As an added incentive we have tucked a promo code inside the video at the beginning of this blog post.
You can receive 20% off our Basic, Pro, and Platinum reports by entering that promo code (it shows up around the 2:40 mark in the video).
Just sign up for your free account by clicking here.
Then use the promo code (on the last checkout page inside our client area) to save 20% on your entire first order.
If you’re confused on what service is best for you… I suggest reading our reviews post which breaks down 11 services and separates them into four different categories.
That tenant background check reviews post is helpful for understanding how to compare apples and oranges in the world of tenant screening.
It really comes down to what your preferences are.
As you can see from this post, we’re big believers in hand-compiling screening reports.
However, some landlords prefer to see a full credit report and have the tenant be able to pay for it directly.
That’s the reason we provide the SmartMove product as one of our four tenant screening packages.
If you still have questions there is a few things you can do.
Our packages page has a helpful tool where you can hover a mouse (or click on mobile) to see an explanation of what exactly the different aspects of a screening report are.
If it’s during business hours (we’re open 55+ hours a week) you can call to chat with one of our FCRA Certified Screeners at 1 (888) 877-8501
You can also Live Chat with one of our screeners by clicking this link here.
Lastly, I’d recommend checking out our private Facebook Group called RentPrep For Landlords. It’s an incredible tool for crowdsourcing questions to fellow landlords.
We’re here to help you through the entire process of finding that perfect renter.
Just ask if you have any questions at all.