Forget adjusting your credit parameters—apartment screening firms say rental payment history, not raw credit scores, is emerging as a preferred metric for approving apartment prospects during the screening process. While credit history is still an important consideration for leasing agents looking to approve would-be renters, screening companies suggest that, in some cases, it could be more beneficial to NOI and asset value if approvals are granted to prospects with stellar payment histories, even if their overall credit is lousy.
“Rental history is the most exciting data set we have. The end-all be-all and best predictor of how someone is going to pay their rent is how they have paid it in the past,” says David Carner, president of Carrollton, Texas–based RealPage’s LeasingDesk resident screening and rental insurance division. “The goal is to try to replace the people whom you’ve rented to [who have] good credit but a checkered payment history with people whom you probably wouldn’t have rented to because of sketchy credit but [who] for the last 18 months have paid their rent in full and on time every single month.”
Since January, Costa Mesa, Calif.–based Experian RentBureau has been including rental payment history as part of the firm’s overall credit scoring and also provides payment history data sets to its screening company partners. “We have information on how renters paid rent responsibly in the past as well as if they paid late, if they skipped out, if they left owing money, or if they left damages,” says Experian RentBureau vice president and managing director Brannan Johnston. “It is a unique data engine that helps to drive increased occupancy where operators can approve individuals they might not have had any information on in the past or decline individuals who may have skipped out on another property manager.”
While payment history data sets are becoming more robust, there’s still work to be done to capture more of the renter universe. Johnston says Experian RentBureau has partnered with six major property management firms so far this year as data providers. “Our focus is on expanding our database to have additional data as well as expanding access to the data by hooking up with new screening partners and new property management software providers who can help us get at that data,” Johnston says.
At RealPage, Carner is pulling data from the firm’s other property management software and is constantly on the search for additional data partners. “I have 25,000 apartment communities using OneSite out there posting rents, and all of that data flows right into my database that I use to screen people,” Carner says. “So one out of every four people screened through LeasingDesk has your past rental history data.”
According to Carner, the upshot to a single 200-unit community that looks to rental payment history as its primary screening metric could be significant. He estimates that turning just three units from good credit/bad payers to bad credit/good payers could save $2,400 annually on bad debt and collections.