5 Warning Signs of Tenant Screening Services
There are Hundreds of Tenant Screening Services
It 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.
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.
Below is a list of the 5 problems we will address in this post.
A table of contents for issues with tenant screening services
- Instant Data Comes With Instant Errors
- Compliance Issues
- Tenant Involvement
- Eviction Data Issues
- 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 Princeton Study: Instant Data Comes With Instant Errors
In the video I mention this Princeton Study that reveals our illogical nature to choose instant gratification over sound decision making.
Here are 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 that 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 were invited to a Thanksgiving dinner, and were presented these two options, 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. They 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 Services:
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, your report is created with less data.
Your report is a mirror image of what’s in the database it pulls from. If that database has errors, they will show up on your report as well.
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 (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.
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 critical. 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 in 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. 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 your tree. 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:
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 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
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 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 also 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:
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.
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 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 that you see 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 their 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, 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 __ 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 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.
When we started in this business 10 years ago, there were very few tenant screening services. Now, there are hundreds as a 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. 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 to respond and are not open on weekends. Now the recently denied tenant is getting impatient as they have a day before this issue will get resolved. Now, your applicant decides to Google “landlord discrimination complaint.” This will yield a search result that looks like this:
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… I suggest reading our tenant screening reviews post which breaks down 11 services and separates them into four different categories.
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 level of support. If you still have questions, there are 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 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.