Pub. 2 2017 Issue 1

15 ISSUE 1 2017 What’s left? Plenty — but it’s necessary to screen everyone the same way on a consistent basis. For example: • Total income. If a potential tenant doesn’t make enough money, that’s a reason not to rent. • References. If someonedisappears abruptly, it is essential to have some way of contacting the people who are closest to that person. • Bad behavior. This is shorthand for a criminal record. That doesn’t mean you should refuse to rent to someone who has a record. It’s possible for people to make a mistake and then straighten out their lives. But if you combine a criminal record with a bad reference froma previous landlord, and the person also comes across during an interview as being nervous and untrustworthy, then pay attention to that. • Destructive habits. Smoking, excessive drinking, and drug use (such as someone who cooks up meth on a regular basis) can affect the value of a property. Screening out people like that is a smart decision. What about people who have a bad credit record and a history of being evicted? That’s another thing you should pay attention to. Col lection records and prior evictions, when considered together, can provide useful information. Eviction records might take weeks or even months to be processed by the court system, which means they are not necessarily available as a timely source of information. Collections records, on the other hand, are likely to be handled more promptly. When someone stops paying rent, most property managers will pass that information on to a collection agency. The collection agency will often then pass along the information to one or more of the three major credit bureaus: Equifax, Experian, and TransUnion. The entire process takes place faster than is the case for eviction records. What is the difference between the three credit bureaus? • Equifax separates open accounts fromclosedaccounts.Thismakes it easier to determine an individual’s total debt by considering all of the open accounts. For the closed accounts, Equifax does list details about closed accounts, including an explanation about why each account was closed. Having that information makes it easier for a lender to understand how potential tenants handled previous loans and debt obligations. • Experian lists on-time rental payment s i f t he prope r t y management company reports it. Experian also lists details about each transferred or closed account, including the month and year that these accounts will be removed from the credit report, which is normally ten years after the last reported status date. • TransUnion prov ides more employment information than the other credit bureaus. Where they list the name of the employer, TransUnion adds the potential tenants current position and date hired. Itturnsoutthatlookingatcollections records as well as prior evictions is effective when it comes to screening potential tenants. TransUnion used a proprietary scoring model called ResidentsScore to analyze 200 properties and to determine who was evicted and who was not. • Evicted residents are almost three times as likely to have a record of previous evictions and rental- related collection records when compared to residents who were not evicted. • For those who were evicted, 21.7 percent had been evicted before. For those who were not evicted, 5.5 percent had been evicted before. ResidentScore has a rating system that goes from 350 to 850. The analysis showed that those who scored from 650 to 749 had an eviction rate of 0.3 percent. In contrast, those who scored from 350 to 449 had an eviction rate of 12.3 percent. It makes sense to say that if someone can’t afford to pay a credit card, that same person might not be able to pay rent, either. That’s the sort of information revealed by proprietary scoring models like ResidentScore. Another tool property managers can use to evaluate tenants is Tr ansUn ion’s ser v ice ca l led SmartMove. This was enhanced in December 2014 so property managers could get a national report of the eviction history for any applicant, including the name of the plaintiff, the place where the property is located, t he e v ic t ion da t e , a nd t he judgement. The service also gives property managers advice on how to evaluate information from ResidentScore and any eviction history that might exist. What’s the best approach for a property manager to take when evaluating a potential tenant? According to Mike Dohert y, S e n i o r Vi c e P r e s i d e n t o f TransUnion’s rental screening solut ions g roup, a rbit r a r i ly declining anyone with a past eviction record is not the best approach. Someone might have an eviction record that is three years old, but the more recent evidence may well suggest that that person is now doing much better and is likely to be a good tenant who will pay the rent.