As outlined in my last post, best-in-class rental screening providers leverage vast amounts of data to develop predictive, accurate solutions.
They also typically employ resources dedicated to understanding the needs of the rental industry. Through the years, we discovered four keys to increasing your net operating income, and we’re sharing them with you now.
Experts unveil four secrets about rental screening that you need to know now:
1. Statistical models are superior
Go beyond subjective decision making. The most predictive screening results are found through statistical models designed to give you insights absent from a rules-based model.
Statistical models aim to account for trends and changes in renter behavior, identify and appropriately weigh the most predictive variables, and forecast expected resident performance at your properties.
Data in action: Consider how foreclosures have changed over the last decade
Before the Great Recession, foreclosures were viewed as negative and most property management companies avoided applicants with prior foreclosures. However, during the Great Recession there was an increase in strategic defaulters. These individuals could afford to pay their mortgage but decided not to. They walked away from their owned properties because it didn’t make financial sense to invest in a depreciating asset.
In general, strategic defaulters were otherwise financially responsible. They had a steady income and were interested in finding a stable, nice place to call home.
During that time, most providers only offered you two choices:
- Decline for presence of a foreclosure, in which case you were missing out on great renters. Or,
- Ignore the presence of a foreclosure, allowing you to accept some individuals who would be unable to pay.
Today, you don’t have to compromise. Sophisticated, real-time statistical resident screening models help determine the likelihood of a previous foreclosure is predictive of a resident’s ability to pay. Thus, you can maximize your screening results by accepting more of the right applicants.
2. Applicant evaluation should vary
You’re probably trained to think that all applicants should be evaluated the same. However, there are times when it makes sense to treat applicants differently. The important thing is to do this based on data—and with model, you can.
What is predictive varies by applicant. Advanced data help discern what “matters” in an applicant’s evaluation and weights it accordingly in the scoring process. Predictive variables are therefore used when generating leasing recommendations.
3. Background checks are an art and science
You want to protect your properties and keep your residents safe from harm. A best-in-class screening provider helps find more relevant that match your applicant.
The art includes evaluating applicant-provided information against available information, such as full name versus nickname, or special characters, typos, and redacted or missing values in address, date of birth (DOB) or social security number (SSN) data fields. The level of sophistication varies greatly by provider.
The science enhances searches with other known applicant information from credit and other databases, such as prior addresses and other names used, like a maiden name. This additional data means missed records and false positive matches are less likely. Furthermore, a sophisticated resident screening solution can enable you to meet your compliance obligations.
4. An applicant’s financial health is always evolving
Traditional credit scores and leasing decisions are based on a consumer’s credit situation at a point in time, however there can be more to it than that. Trended credit data provides an added dimension to help you better determine an applicant’s risk score based on credit usage over time. With that insight your screening provider can provide credit and eviction recommendations which account for how an applicant’s credit and payment behaviors is trending – avoiding those who are deteriorating and accepting those who may have experienced a negative life event but have been improving.
Watch our on-demand webinar for a deeper look into these four secrets you need to know about rental screening. Here’s a high-level snapshot you can save so you keep these secrets close at hand. And learn more about TransUnion’s advanced rental screening solutions at rentalscreening.transunion.com.