Tenant Screening Software: Managing Risk

Identity theft, Free Loaders, Collections, Small claims court and worse. Whats an owner to do. If you think about it, tenant screening is all about risk management. What is worse than a long term relationship with a deadbeat or a constant annoyance.

The credit report goes a long way towards trying to measure the reliability of potential resident. The FICO score is comprised of over a hundred variables to help you measure the behavior of a human being. There are more tools available for the owner/manager to help keep the problem people out of your life.

We wanted to follow up on the last blog entry with some automated tools being used by some landlords.
Tenant screening software comes in two varieties...

1. Rules Based Software: It is an interactive approach requiring the owner/manager to set the criteria they want to use to screen potentials. Each applicant must pass these criteria.
The variables that are commonly used are often similar to the major criteria seen in a credit report, FICO scores use over one hundred criteria but some of the most critical ratios are:

  • Rent to Income
  • Debt to Income
  • Late Payments
  • Insufficient funds or bounced checks
  • Evictions and much more, criteria is added by the owner/manager
2. Statistical Based Software: Statistical software trys to predict tenant behavior. It uses statistical scoring models based on the actual behavior of hundreds of thousands of tenant behavior. This is an attempt to quantify human behavior and to reliably predict the future behavior of a potential tenant in the future.

The statistical approach maintains a data base of tenants and the factual data regarding the tenancy. It attempts to find tenant behavioral patterns by mining the data and using the common factors to predict the behavior of an applicant.
Tenants that are late pays or dont pay rent seem to have patterns of behavior that are in the public records.

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