Get to Know Your Applicants Better with Rental Payment History
The economic roller coaster that we’ve been riding for the last few years has made the applicant screening process trickier than ever. Yes, apartment occupancy is on the rise as more and more people choose to rent. But despite the economic rebound, statistics show that credit scores are trending downward.
Credit Reports Only Tell Part of the Story
A simple explanation behind this trend is timing. Credit reports are a lagging indicator of what’s going on in the economy. Credit reports are simply a reflection of what’s happened in the past. So, even if you believe the economy has turned the corner, credit reports are still reflecting the doom and gloom from past months.
Of course, credit reports are critical to gauging an applicant’s financial health, but they do not give you insight into how they paid their rent. Consider:
- During the rough economy many applicants made sure their rent was paid every month even if it meant foregoing payments on credit cards and cars. This means that many applicants who now have dents and dings to their credit reports actually make great renters. A credit report alone won’t tell you this.
- Then, there are those applicants whose credit reports tell a good story. However, rental payment history typically isn’t reported to credit bureaus, and if a legal judgment over rent does occur, it can take many months for it to show up on a credit report. Another pitfall of relying solely on a credit report.
Knowing this, how can you feel confident that your resident screening process is doing the best job of identifying good renters and protecting your net operating income?
The answer is rental payment history.
Rental Payment History Tells You the Whole Story
Knowing how applicants have paid rent in the past is the best indicator for how they will pay their rent in the future should they become your resident. When rental payment history is included in your screening process, you’ll know things about your applicants like:
- Late payment history
- Late Fee history
- Insufficient Fund history
- Final disposition status
Additionally, rental payment history can include good behavior, which is especially important when considering applicants who have little or borderline credit. This includes:
- On-time payments
- Returned deposits
- Proper Notice
- Re-rent eligibility
Without rental payment history, you could be turning away good renters if you’re only looking at a credit history. This important insight isn’t found on a credit report.
Are you getting the whole story on your applicants by using rental payment history in your applicant screening process? What results have you seen?