When it comes to snagging the perfect rental, sometimes it can feel like luck of the draw – particularly if multiple would-be tenants are interested in the property, and tons of rental applications have rolled in.
So what exactly does a landlord look for in a tenant? Are there any secrets to rental success?
The answer is yes, and the secret formula is actually pretty simple. Landlords and professional property managers alike want tenants who will pay rent on time, maintain the property that is leased to them, and not disturb other tenants. The challenge landlords face is determining measures of risk, as there is not a definitive solitary metric that signals who will be a great tenant.
Most landlords will use a combination of screening measures to help determine if a tenant is a good fit, but it’s not perfect science.
However, there are several screening criteria that landlords rely heavily on. Understanding what landlords are looking for, and why, can be the key to strengthening your rental application, and ultimately landing the perfect rental.
Before you submit your rental applications, it’s a good idea to check your credit report– both for accuracy of information, and to understand what your credit score is.
There are three primary credit reporting agencies: Equifax, Experian, and TransUnion. Although calculations can vary slightly between the three bureaus, each will produce a consumer report with a FICO score denoted.
A FICO score consists of five areas: payment history, current level of indebtedness, types of credit used, length of credit history, and new accounts.
FICO scores vary slightly in numerical range from 300 to 850, depending on the reporting agency, but in general credit scores are reported as: Very Poor/Bad, Bad, Fair, Good, and Excellent. Most landlords should have a minimum score or a target range as an application threshold. As an applicant, you are entitled to know that screening criteria.
If your credit score is not where you’d like it to be or below the given rental application’s minimum acceptable category, there are a couple of strategies you can offer:
Having good credit is only part of the application puzzle. Landlords want to know that an applicant has a sufficient, reliable source of income that will allow them to afford the rental, and that the applicant’s debt-to-income (DTI) ratio will be sustainable for the duration of the lease. For example, many landlords may want to see housing debt not exceed 43% of household income. Higher DTI’s correlate with an increased default risk, in that there may not be enough income to cover rent, in light of other expenses. So it’s understandable that landlords will carefully view sources of income in making their tenant selections.
Sources of income, however, can come from a variety of means. Landlords can ask for a traditional W-2, Leave and Earnings Statement (LES), 1099, or proof of disability or social security income, annuities, or other income sources, such as child support or debt settlements.
The Fair Housing Act (a federal law) doesn’t bar landlords from discriminating based on an applicant’s source of income. However, many states and local city or county municipalities have enacted legislation that landlords cannot discriminate based on the source of income, such as an applicant using a Section 8 housing voucher. As a potential tenant, take a quick look at your state’s landlord tenant law, for any income screening guidelines.
In addition to a credit report and income verification, many landlords also use consumer reports, which are tenant background checks vetted through companies that aggregate and compile background information. These tenant background checks can include a variety of information, including rental and eviction history, credit, and criminal records to include any lawsuits in which you were a named party.
Landlords are allowed to use consumer reports to make tenant decisions, as long as they follow the Fair Credit Reporting Act (FCRA), which is governed by the Federal Trade Commission (FTC).
Landlords must be transparent in the screening criteria they use for tenants, as well as follow the Federal Fair Housing Act. As long as landlords are applying the same criteria gleaned from consumer reports equally for each applicant, the scrutiny is valid in processing tenant applications.
While your credit and consumer reports provide a glimpse into how well you manage your finances and other obligations, landlords will often ask for your rental and/or homeownership histories in making their decision, as well as a reference for each address.
Longer periods of time at each address do suggest a more stable renter or homeowner, so as a military family, if you’ve averaged a new address every 18 months, it’s worth selling yourself to a potential landlord that you like to move once and done at a new duty station!
It’s true what you’ve heard regarding first impressions: they can make or break an application. All other things being equal, take the time to make the best first impression you can.
Tenant turnover is the biggest expense and source of anxiety for landlords. Any amount of suspense you can remove from that process could mean the difference in being approved for the lease– or a pass.
Want more tips on being a great tenant? We've got you covered with 6 Tips for Being a Tenant that Landlords Love.