Screening pros also stress the importance of tying ancillary revenue opportunities to applicant screening by applying security-deposit and rent increases to renters who eke through the screening process with conditional approval. “At the high end of the scoring spectrum, you get an apartment with standard deposits and rent, but if you fall down lower in the spectrum, we can still approve you with higher levels of deposits or rent,” Jenkins says. “We’ve been doing that for quite a while.”
A New Look at Credit
In and of itself, credit may no longer even be the best indicator of a rental applicant’s suitability for approval. As a lagging economic indicator, consumer credit scores typically don’t reflect current market conditions and may not even react to economic conditions in an intuitive way at all. “Creditworthiness has remained consistent over the past two years despite the recession,” says Jay Harris, vice president of business services at Rockville, Md.–based multifamily screening firm CoreLogic SafeRent. “On Class A, they’ve even gone up. What’s more pronounced is the seasonality when it comes to credit score variation. We’re finding that the best applicants typically come in the second and third quarters.”
Still, apartment screening firms say rental payment history and not raw credit scores is quickly emerging as the 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.
Since January, Costa Mesa, Calif.–based Experian Rent Bureau has been including rental payment history as part of the firm’s overall credit scoring system 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 Rent Bureau vice president and managing director Brannan Johnston. “It’s a unique data engine that helps 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.”
At RealPage, Carner is pulling data from the firm’s other property management software and is constantly in search of 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 rental history data, which is the most exciting data set we have, because 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.”