As a landlord, ensuring that your tenants can pay their rent on time is paramount. Dealing with a bad tenant can lead to costly evictions, causing financial and time-consuming headaches. To avoid this, effective tenant screening is crucial. In this guide, we will explore the differences between ResidentScore and credit score, and why ResidentScore is essential in the tenant screening process.
What Is A ResidentScore?
A ResidentScore is a specially designed score that provides insights into the outcome of a lease. TransUnion created this score by analyzing nationwide credit data and combining it with demographic and eviction characteristics. The ResidentScore predicts high-risk outcomes for the rental industry.
ResidentScore vs. Credit Score: What You Need To Know
Having access to rental industry-specific data is essential for landlords. It helps reduce unnecessary risks and highlights potential red flags in prospective tenants. According to a TransUnion survey, 84% of independent landlords rank “payment problems” as their top concern. Let’s dive into the differences between ResidentScore and credit score to understand why ResidentScore is crucial in tenant screening.
Traditionally, landlords have relied on credit scores to assess a tenant’s financial stability. Credit scores analyze factors such as payment history, total debt owed, length of credit history, new credit, and types of credit. However, these scoring models are more tailored to the financial services industry and may not capture rental industry-specific risks.
TransUnion created the ResidentScore by analyzing payment history from 2.9 million residents. This model focuses on uncovering instances of evictions, 3+ late payments, and insufficient funds within a 12-month lease term. Factors considered in the ResidentScore include positive and negative payment history, credit usage, credit history, credit availability, and inquiry history.
Importance of ResidentScore to Landlords Everywhere
By utilizing ResidentScore alongside credit scores, landlords gain active insights into the likelihood of a bad rental outcome. According to TransUnion, ResidentScore identifies 15% more evictions and 19% more skips compared to typical credit scores. This enables landlords to make more informed decisions and minimize financial risks.
The Landlord-Tenant Relationship In 2022: Mitigating Risk
To mitigate risks and ensure a valuable experience as a landlord, gathering comprehensive data on prospective tenants is essential. A solid tenant screening plan allows landlords to proactively address potential issues throughout the rental relationship. While credit scores provide some insights into tenants’ financial behavior, ResidentScore offers a more defined perspective.
In conclusion, ResidentScore provides valuable information specific to the rental industry. By incorporating ResidentScore into your tenant screening process, you can make informed decisions, minimize risks, and foster a positive landlord-tenant relationship.