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Resident Application Approval Process: Key Indicators

Posted on 17. Jun, 2010 by Mary Girsch-Bock in Business

Years ago, approving applicants was a relatively simple process for property management companies. You checked an applicant’s credit report, perhaps called a former landlord, verified employment, and soon you were taking deposits and setting up a move-in date.

Like many other things, the rules have changed. Sure, you still do all of the things you did before. But now, many property managers are finding themselves faced with applicants that are presenting with a significantly lower credit score than in previous years.

There are numerous reasons why a credit score can take a sudden dive. Company cutbacks, massive job layoffs and the mortgage industry meltdown have all equally contributed to the lowering of credit scores of people who in previous years were excellent credit risks.

But should a lower credit score automatically eliminate applicants from consideration?

In many cases, no.

There are exceptions (which will be discussed in Part II of this article). With a slowed economy and a long recovery period forecast, the rental market will continue to strengthen due in large part to those pushed out of the home ownership arena, either by choice or necessity.

There are many reasons behind this jump in potential renters. Many future homeowners are now waiting for a more stabilized economy before buying a home. These applicants rarely pose a problem; they have a steady job and a decent credit score. But what should you do about the applicant whose credit score has dropped as a direct result of the economic downturn?

If you know what to look for on a credit report, you can acknowledge the risks up front and make a decision based on not just a number, but the history behind that number as well.

What can you look for to determine applicant risk?

Rental History
The rental history of an applicant is by far the most important area that property managers should review. A history of timely rental payments and a good landlord reference should carry more weight than just about anything else.

Steady Employment
Steady employment is another important marker. Combining a solid employment history with a solid rental history indicates the level of responsibility that every property manager desires in their residents.

Area Ties/Involvement
Is your applicant an established member of the community? Does he or she have letters of reference from employers or former landlords? The more they’ve invested in the community, the more likely they are to be a good resident.

In Part II, we’ll discuss what areas are red flags.

Related Posts
Resident Application Approval Process: Red Flags
What’s The Most Important Resident Screening Criteria?
Rent vs. Buy
Screening Tenants Consistently for Fair Housing
Getting Up To Speed With Fair Housing Laws

Tags: applicants, move-in