Landlords and tenants often accept the tenant screening process as a formality. But there’s a hidden set of processes that work behind the scenes to create the neatly formatted PDFs landlords rely on to evaluate applicants. And sometimes those tenant background checks are flat out inaccurate.
A recent study conducted by Rent Butter, a next-generation tenant screening service provider and TurboTenant partner, revealed that one in seven traditional tenant background checks contain inaccurate or missing data. In the 30-day study, legacy screening methods failed to identify six registered sex offenders, 85 felony convictions, and 34 misdemeanors in already accepted applications out of 1,000 screenings.
These inaccuracies have the potential to create a catastrophe for landlords. And tenants can feel the pain if an inaccurate report works against them and causes an unfair denial.
Considering this reality, we’ll examine the information screening reports contain, how inaccuracies hurt both tenants and landlords, why data gets mixed up, and how next-generation providers are addressing these challenges.
You don’t have to look far to find examples of inaccurate screening reports impacting innocent people. In 2020, The New York Times reported three examples of mistaken identity. Each case resulted in a housing denial, leaving one applicant homeless.
“Glenn Patrick Thomas Sr and Glenn Patrick Thompson Jr., who said they had been left homeless near Seattle after a tenant screening company called On-Site, which is now a part of RealPage, told two different landlords that the father and son had been previously evicted. In fact, the eviction was for a Patricia Thompson, who was not related to them.”
To add insult to injury, tenants typically pay between $30 and $75 for these reports. So, not only are they denied housing, but often they also have to pay a fee for each application they submit. By the time the applicant can dispute the report, the landlord has likely moved forward with another applicant.
To find housing quickly, renters must apply for another property and pay another fee, unless their state or city allows the use of portable tenant screening reports (PTSRs).
If the city or state allows PTSRs, tenants can pay for the report themselves, collect any information disputing it, and speak directly with the landlord to explain any inconsistencies. It’s not the most efficient process, but it’s better than nothing.
On the other side of the equation are landlords. And while most of the headlines you’ll come across on the internet focus on tenants who are harmed by inaccurate screening reports, the reality is that landlords have no say in what the screening service delivers to their inboxes.
There are financial considerations, which we’ll address next, but landlords can easily invite unwanted legal attention when they accept the results of screening reports at face value.
In two lawsuits filed late last year, “two large private-equity-backed landlords discriminated against prospective tenants by relying on screening systems reporting inaccurate information about applicants’ previous evictions and criminal histories,” according to NBC News.
In another lawsuit involving the Washington, D.C. housing authority, the tenant screening company contracted to run reports for the housing authority is facing a lawsuit claiming,
“The plaintiffs mentioned how the company confused individuals with similar names and used court proceedings for unrelated individuals. Furthermore, these reports contained information seven years or older, violating the Fair Credit Reporting Act’s (FCRA) provisions.”
In this case, landlords relied on the housing authority to vet tenants. However, the outcome was essentially the same; landlords (and the housing authority) found themselves in hot water by accepting the results of a tenant screening report.
For landlords, verifying the information within the report can save considerable time, stress, and money. And a close eye on screening reports might be the ticket to landing a quality tenant whom a landlord might have otherwise denied.
Any judgment against a landlord has the potential to harm their financial standing. Additionally, if a report fails to attribute negative financial, criminal, or eviction history to an applicant, landlords may find themselves with a tenant who fails to pay rent on time, causes property damage, or requires eviction.
Alternatively, when a landlord denies a tenant due to false information, they not only dismiss what could have been a great tenant, but for each day their rental remains vacant, they also lose $65 a day on average in the US. For a single day, that may not seem like much, but when vacancies extend to two weeks, losses pile up to over $900.
Note: We calculated the total based on a $2,000 monthly rent and a 31-day month, which may be a low estimate in some states such as New York and California.
Finally, as referenced in the introduction, Rent Butter identified several instances of serious issues within accepted rental applications. The potential harm that an inaccurate background report could have on the community should not be understated.
Imagine if an inaccurate screening report opens the door for a violent criminal to rent a home in a family-centered neighborhood, or if a person on the National Sex Offender Registry moves into a school zone. It’s critical that landlord scrutinize screening reports to safeguard their communities, properties, and reputations.
With so much at stake for both landlords and tenants, it’s essential to understand the information a tenant background check will return.
Probably the most well-understood aspect of any tenant background report is the credit check, which landlords use to gauge a tenant’s financial responsibility and their likelihood of paying rent on time. Credit bureaus compile credit reports using:
Keep in mind that these reports can be skewed by data that doesn’t accurately reflect the trustworthiness of an applicant at the current moment. For example, financial activity from years ago can impact an applicant’s current score.
Of the three major components of a tenant screening report, criminal histories help landlords screen for safety concerns. Reports often include:
The problem is that sometimes these reports include information that state or city-specific laws prohibit landlords from using when selecting a renter.
For landlords, no part of the report could be as concerning as an applicant with a history of eviction. When running the report, an eviction history will show:
With legislation changing at a rapid pace, it can be challenging to keep up with the laws, which may result in sealed records and other non-disqualifying factors unfairly appearing in screening reports.
As we mentioned in the previous sections, sometimes information that shouldn’t appear ends up trickling through to the final report that landlords receive. However, due to the algorithmic nature of tenant screening reports and slow-to-update data, mistakes frequently occur.
A common situation is the phenomenon of mixed records, which occurs when a report combines an applicant’s data with that of another person, as mentioned in the New York Times example above.
The result is a situation where somebody with a clean record may end up with a report displaying inaccurate results. Part of the reason this occurs is due to wildcard matching, where a service attempts to gather data based on similar names to find a match.
In Terrence Enright’s federal lawsuit against National Tenant Network, as described by the New York Times,
“the company searched for “Enright, Ter*” and “Terrence, Enr*.” But the company also searched for misspelled versions, including “Enwright, Ter*” and found a match: an eviction for a Teri Enwright in California, one of what Mr. Enright said were three evictions mistakenly attributed to him, which resulted in his being denied the apartment.”
Complicating the issue of background checks is the fact that some states and cities restrict the information that landlords can use to inform their housing decisions. In California, for example, a landlord cannot deny housing based on information related to sealed or expunged records, nonviolent offenses, or arrests that didn’t lead to a conviction in cases older than 7 years.
In Chicago, the city requires landlords to use a two-step process to accept or deny an applicant. Tenants must first pass a prequalification stage that scrutinizes their employment history, income, credit history, and other relevant factors before a landlord can conduct a criminal background check.
In that stage, the landlord can only consider criminal history from the past 3 years.
Regarding evictions, some states and cities restrict the use of eviction histories in making decisions about applicants. Idaho and Washington, D.C., for example, seal eviction records after 3 years if they result in a judgment that favors the landlord.
Finally, in some financial records, a tenant screening report may include inaccurate information regarding:
In all of these circumstances, outdated information can restrict the renter’s ability to secure housing while exposing the landlord to legal liability.
Like any industry, companies have entered the tenant screening market, disrupting the status quo. For example, Rent Butter has identified gaps in the traditional screening process and filled them in to ensure landlords receive accurate data and tenants are accurately portrayed.
Rather than relying on sometimes inaccurate or outdated credit reporting and potentially fraudulent tenant-supplied financial information, Rent Butter gives landlords the ability to analyze a more current view of a tenant’s financial behavior by using direct-source income verification.
Tenants simply permit Rent Butter to connect directly with their bank account, allowing for a real-time view of spending patterns, rent payment history, and income streams. This screening method is beneficial for gig workers who don’t always receive consistent payments.
Legacy providers often use a single provider for criminal reporting. Whatever delays or misses the single provider has, it ultimately impacts the reports that landlords receive.
Rent Butter works to identify those gaps by using multiple data sources and purpose-built proprietary software to offer landlords a more comprehensive picture of the tenant’s criminal history. The result is a system with false-positive filtering that’s also capable of omitting sealed or outdated records.
Finally, RentButter’s next-generation tools search court records across the U.S. for a complete picture of an applicant’s eviction history. It goes a step further by verifying details with past landlords and rent payment databases to ensure the information pulled lines up.
Landlords interested in leveraging next-generation tenant screening services to fill their vacancies can benefit by utilizing a holistic approach to the screening process.
With the right solution, landlords gain a more comprehensive view of any applicant who applies for their rental property. This approach is a great way to identify the best tenant while ensuring that the records they review are of the highest quality.
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