Tenant Screening Services

5 Dangers with Tenant Screening Services

Chapter 09

There are hundreds of tenant screening services

Tenant Screening ServicesIt can feel dizzying trying to figure out what service is the right fit.

That’s why we’re going to identify 5 common issues that you should be aware of when vetting a tenant screening service.

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.

Below is a list of the 5 problems we will address in this post.

Table of contents for dangers with tenant screening services

  1. Instant Data Comes With Instant Errors
  2. Compliance Issues
  3. Tenant Involvement
  4. Eviction Data Issues
  5. Customer Support Outsourcing

But… before we get started, let’s address this simple question.

What is a tenant screening service?

Tenant screening services are consumer reporting agencies (CRAs) that provide background data on tenant applicants. The data can include bankruptcies, judgments, liens, credit reports, sex offender status, criminal history, eviction history and employment verifications. The report they provide helps to give a landlord a clearer picture of their tenant applicant before deciding whom to choose for their rentals.

Now let’s get to the issues that commonly plague tenant screening services.

#1 Instant data comes with instant errors on background reports

If you Google something in quotes it will only provide results that are exact matches to your query.

In the image below you can see that a search for “instant tenant screening” provides roughly 9,870 results.

 

instant tenant screening

 

The search results are littered with companies promoting themselves as an instant tenant screening service…

…as if this were a benefit to the landlord.

Why does this matter to a landlord running a background check?

Simply put… databases have a lot of errors and an instantly generated report will instantly share those errors with a landlord.

In the last wide-scale study done by the FTC in 2015, they found that 23% of consumers found inaccurate information in their credit reports.

 

Inaccuracies in consumer reports
[source: wikipedia]

 

Credit reports are generated the same way that tenant background checks are created.

When you run a report the information is pulled from various databases to compile a background report on your tenant applicant.

There are three main identifiers used to ID an applicant:

  1. Name
  2. Date of Birth
  3. Social Security Number

Databases by nature have errors due to various reasons:

  • False positives (this happens with common names)
  • Ommissions
  • Incorrect entries

False Positives Explained

A false positive happens when someone else’s record(s) shows up on the applicant’s background report. This is common with individuals with common names.

Here at RentPrep, we have a private Facebook Group for landlords that has 8,605 members (as of updating this post on September 12, 2018).
It’s a free service we provide to help our clients and other landlords deal with common issues.

Just in that small sample size, our group has 94 members with the last name “Smith”

Common name issues on background report

On top of that we have the following members with the same names:

  • 3 Robert Smith’s
  • 3 James Smith’s
  • 2 Sarah Smith’s

This is just in our (relatively speaking) tiny Facebook group.

In our client database, we have 337 Smiths out of 45,914 clients.

According to ancestry.com the most common name is Robert Smith with 34,269 matching names.

When you’re looking at a negative record on your tenant applicant’s report, there’s a chance you’re seeing a record of someone else.

The more common your tenant applicant’s name is, the more likely a false positive will occur.

That’s because a human (a court clerk, sheriff, cop, etc) inputted that data into the database and humans are prone to making errors. They ID the wrong individual and create a criminal record on someone’s file who has never committed a crime in their life.

Databases aggregate all data (good and bad) and instant tenant screening companies pull all of that data and put it on your report… instantly.

Most tenant screening services are built to maximize profits. This means satisfying our desire for immediate gratification.

This business model works because most landlords don’t have a frame of reference for what goes into a tenant screening report.

For example, if you were invited to a Thanksgiving dinner, and were presented these two options, which would you choose?

Turkey Dinner Question

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 and they will choose the instant service because it sounds better on the surface.

A service that has a few hour turnaround time is slower. The reason being is that someone is manually fact-checking the report to remove all possible errors.

This can be done by cross-referencing different databases and seeing if the date of births matches on your tenant applicant and the records in their report?

Here at RentPrep we’re biased… but we hire and employ FCRA Certified Screeners so they can remove as many errors from your report before you ever see it.

It’s not as profitable to hire additional people but when your company is founded by a former Marine you must stay faithful to your clients and provide the best possible service.

In case you didn’t know, Semper Fidelis means “always faithful” and is the motto of the US Marine Corps.

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 (by nature) have errors. 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.

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 critical. That’s why it is #2 on our list.

#2 Compliance and the FCRA

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 worth highlighting.

FCRA- Disputing inaccuracies:

 

 

The image above is stating that the tenant applicant has the right to dispute what they believe are inaccuracies in their report.

This is a compounding problem when it comes to companies that only provide instant background searches.

In fact, this recently came into the news as an instant tenant screening service is being sued for passing along erroneous criminal records in their report.

The lawsuit asserts that CoreLogic’s tenant screening tool denied a Connecticut mother’s request to move her disabled son into her apartment based on a record of a dismissed shoplifting arrest from 2014. Although rental decisions have traditionally been made by housing providers, today many landlords contract with third-party tenant-screeners to make admission decisions for them. This litigation seeks to ensure that CoreLogic and all tenant-screening companies who functionally make rental decisions on behalf of landlords make those decisions in accordance with fair housing requirements. [source: ctfairhousing.org]

This particular criminal record was expunged but no one actually checked the report before instantly passing it to the landlord.

This issues compounds when your applicant is going to have trouble finding someone to fix the inaccurate information.

If you can’t get ahold of someone on the phone… neither can your recently denied tenant applicant.

That means they’re going to be barking up the landlord’s tree about the report.

Pro Tip: Research your available tenant screening services and see if they have a phone number readily available. Try 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:

 

tenant screening company

 

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.

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…

 

Tenant Screening Services and FCRA

 

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 crucial 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

#3 Tenant Involvement Varies by Screening Service

This topic is an excellent example of, “different strokes for different folks” that we mentioned at the beginning of this post.

That’s because some landlords don’t mind if the tenant is involved in the screening process while others avoid it completely.

What does “tenant involvement” mean?

Some services (such as SmartMove which we offer) requires 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:

tenant screening services with tenant involvment

This is an added hurdle that is not part of the tenant screening process with a “zero tenant involvement” service.

At RentPrep we have different screening packages, and our RentPrep core packages are zero tenant involvement and SmartMove orders do involve the tenant.

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. The other main reason was so we could provide full credit reports for those landlords interested in them.

#4 Eviction Data Issues

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.

Tenant Eviction screening Source – TransUnion

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 are a few problems we see with some tenant screening services when it comes to eviction data.

Let’s identify these issues as red flags…

eviction data first 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.

eviction 2nd red flag

I don’t want to name names, so I’m just sharing a narrow screenshot I found on a tenant screening services pricing page.

tenant screening services not including eviction data copy

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 mentioned earlier).

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 that you see if they have a criminal or eviction records in another state.

   #2 – The cost is miniscule to the screening company

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 substantially more money. If you see tenant screening packages being split up by statewide and nationwide searches we’d question the integrity of that service unless the difference between packages is only an added dollar.

Many times we see they’ll charge $10 more to add nationwide searches which is a markup of 50-100x depending on the search.

Again, that’s not acting faithfully to your customers… it’s price gouging them.

eviction data 3rd red flag

The first two red flags (in our 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 may want to continue looking.

At the risk of sounding redundant, our third red flag goes back to instant vs. hand-compiled background reports.

As mentioned earlier, some databases 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 X 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 have 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 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.

#5 Customer Support Can Be Questionable

When we started in this business 11 years ago, there were very few tenant screening services.

Now, there are hundreds as a software developer can build a slick site and plug into another service using a tenant screening API.

There’s nothing wrong with this. In fact, we offer a tenant screening API through RentPrep and many services use our screening as reseller.

The problem occurs when the developer doesn’t account for customer service.

Beyond not being able to get your personal questions answered… you’re also creating a potential issue with a denied applicant.

Under the laws of the Fair Credit Reporting Act, a tenant applicant is afforded the right to see a copy of their background report.

It is your screening service’s duty to provide that report. DO NOT share your copy of the report with the denied applicant as this could open you up to liability.

Imagine this scenario…

You’ve just denied a potential renter due to information found in their background report.

This person is desperate for housing and demands to see a copy of the report.

On top of finding the right tenant, now you have to help someone you denied to get a copy of their report.

This is where having great customer support comes in handy.

If you use a service such as RentPrep, you just give them our phone number and we’ll handle the angry applicant.

We’re open 7 days a week and reachable by phone, email and Live Chat.

However, if you used another service that uses a support ticket system you’re not getting an immediate response.

Many of these services will take a day or more to respond and are not open on weekends. The person responding might live outside of the country as it’s cheaper to outsource all customer service.

Now the recently denied tenant is getting impatient and your applicant decides to Google “landlord discrimination complaint.”

This will yield a search result that looks like this:

HUD Complaint

At this point, the applicant is one click away from filing a formal complaint against you for discrimination.

If they don’t click the direct site-link highlighted by the arrow, they’re three clicks away.

Under new guidelines, a landlord can be charged a civil penalty of $19,787 for his or her first violation of the Fair Housing Act.

We answer calls every day from denied applicants that want to see a copy of their background report.

More times than not there is negative information on their report that they were unaware of.

When it comes to a tenant screening service you want your report to take a little bit of time but support to be lightning quick.

This rule of thumb can save you from a lot of heartache.

If you’re confused on what service is best for you… we suggest reading our tenant screening reviews post which breaks down 11 services and separates them into four different categories.

Although, if we’re being transparent (which is what this post is all about) we’d love to be your tenant screening provider.

Parting Thoughts…

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. This comes with our industry-leading customer support.

If you still have questions, there are a few things you can do.

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 during office hours.

We’re here to help you through the entire process of finding that perfect renter.

Just ask if you have any questions at all.