How to find the perfect tenants while Leasing in Chicago

At Lofty, we have experienced our fair share of “bad” tenants taken on from other Property Management companies or individual landlords. Unfortunately, there will always be fraudsters, scammers, and dishonest people attempting to get good housing by lying about their financial situation, tenancy history, credit score, or employment status etc. To avoid having to then pursue a costly and time-consuming eviction process of these bad tenants, the first step is to have a good and basically fool-proof screening system in place.

Every Chicago landlord should know that every successful Chicago apartment tenancy begins with a proper tenant screening and a tenant credit check.  Due to recent changes in Cook County law, landlords and Property Managers have been revisiting their tenant screening procedures in 2020, when a new Cook County anti-discrimination law called the Just Housing Ordinance went into effect. That, on top of concerns in getting stuck with a tenant that then can’t be evicted due to Governor Pritzker’s continued eviction moratorium, has made property owners and managers extra cautious of being vigilant in their screening process.

Some basics to know before we dive into having the best screening process for Chicago Tenants.

• If you are interested in Property Management services, the company you choose should handle all tenant screenings through a concise and streamlined process that they have perfected through experience so you don’t have to.
• Tenant Applicants pay for the cost of screening and background checks. There is no cost to the landlord/owner as this is part of the application process.
• Be warned, that while some applicants may look perfect on paper, this can indicate that it may be too good to be true. Use your good judgement, the advice of real estate professionals, and further research if in doubt. Remember, references are there to be contacted!

Why Where You Advertise Your Application Matters:

There is no doubt that there are positives to every platform of advertising, and this post is not meant to discredit any of them. However, to find stellar tenants there are platforms that are less likely to receive positive results than others. The likes of Craigslist and Facebook marketplace, while not bad by any means, will undoubtedly receive drastically different results than the likes of via a professional real estate company’s website, word-of-mouth recommendations from trusted people, and those represented by an agent. This is because of the varying target audience and varying degrees of perceived professionalism. Someone applying for a rental via Craigslist may not feel the need to have a 650+ credit score, whereas other platforms will make this a requirement to even apply, nevermind to be considered.

Do you Need to Know any Chicago/IL/National Tenant Screening Laws?

All landlords should be familiar with applicable tenancy laws. In April of 2019, the Cook County Board of Commissioners voted to pass the Just Housing Ordinance (JHO), with the ordinance scheduled to take effect on December 31, 2019. This requires all landlords in Cook County to assess a potential tenant’s qualifications before looking at his/her criminal history. It prohibits landlords from denying housing on the basis of arrests, juvenile records, sealed and expunged records. If a criminal background check shows that an applicant has a criminal conviction, the landlord must disclose the source of the information to the applicant so that he/she can dispute its accuracy. Landlords must also perform an individualized assessment of the tenant’s criminal history before denying housing.

In addition to concerns about criminal history, most landlords review a tenant’s credit history. Federal law mandates that all three major credit bureaus—TransUnion, Experian, and Equifax—require landlords to undergo a rigorous on-site inspection by a licensed third party inspector before receiving an applicant’s full credit check report. Inspectors check to make sure that reports are stored in a locked file cabinet, that there is a shredder onsite, and that the landlord’s home office is separate from the living area. Inspections can take several days to schedule and incur an additional cost to the landlord. Additionally, many part-time landlords may not pass such an inspection. However, if the applicant initiates the tenant screening process, an on-site inspection is not required, which is ideal for smaller landlords who screen tenants only a few times each year.

What Questions Should You Ask?

Landlords should ask for contact information of at least 2 previous landlords (not roommates, friends, or significant others) in the tenant’s rental application form, follow up with, and verify them as such. Aside from the obvious questions about eviction and damages in the tenant’s history, landlords should also inquire about complaints from neighbors, cleanliness of the apartment and any other potential red flags in their apartment rental history.

All Chicago apartment landlords should not accept any rental application, irrespective of the results of a credit report, until they’ve examined a bona fide form of photo identification clearly tying the prospective tenant to the name on the report. Careful landlords should check the birthdate on a credit report to the birthdate on a driver’s license to ensure that children who bear the same name as their parents do not attempt to finagle their way into a lease by substituting their parents’ pristine credit for their own. That has been known to happen from time to time, so landlords should themselves a favor when they’re being vigilant in their own “pre-screening” process. For landlords who do not have the time for these steps, it is strongly advised to not cut corners and to be aware that Property Managers are often hired for this exact purpose.

What Information will a Tenant Credit Check provide you with?

Valuable information such as, does the applicant have outstanding debt, past bankruptcy filings, or other financial obligations? Do they have large balances on credit cards? Do they have any liens taken out against them or their property? These answers could have major implications to a tenant’s ability to pay the rent in full and on time and are included in a full credit report.

Landlords should determine an acceptable range of credit to move forward with a tenant’s application. A healthy credit score should be consistent, similar in range from the three credit bureaus, and ideally are not thin files (less than five sources of credit). Landlords should apply the same credit history requirements to all tenants — remember that in Chicago and Cook County, landlords cannot discriminate based on a tenant’s source of income. Landlords should be familiar with fair housing laws and can read more about how they work here.

What are the main problems of tenant screening services?

Many tenant screening services conducted by third-parties are beneficial for a number of reasons, namely that they’re efficient. Landlords looking for this may appreciate a quick, cost-effective screening process, however there are some drawbacks associated with this convenience. Namely, the reliability of the aggregated data. These third-party companies are pulling data from a number of public databases, and with a common surname there is an increased likelihood that landlords will see results for a completely different person in their tenant screening report. This is not the norm, but unfortunately it can be quite common.

Another problem with tenant screening reports comes in the form of customer service. Tenant screenings are generally viewed as speedy and quick transactions that follow the typical script of 1) landlord provides email address to screening company, 2) applicant receives email from the company and pays the screening fee, 3) credit report comes back to the landlord, and then the ball is in the landlord’s court. The decision to move forward with an applicant is squarely on them and they (hopefully) hold enough information to make an informed, unbiased decision. If the decision is to not move forward with a tenant’s application because of something on the credit report, then the landlord must inform the tenant that the credit check was the issue. The Federal Fair Credit Reporting Act requires landlords to provide an adverse action letter to tenants to inform them that something in the credit report was concerning and the name and contact information for that credit agency, too, so that the tenant can request a copy.

What Does My Ideal Tenant Look Like?

If you feel uncomfortable accepting credit scores lower than, for example 650, but you want to offer the option of a cosigner, then the same due diligence is required for checking the co-signer’s credit, employment history, criminal history etc. At Lofty, we take the approach that a good rent to income ratio is 30% or higher, a credit score of 650+, and continuous employment of 3 months or longer. Specific landlord requirements can deviate from this, and while tenant applicants do not need a 800+ credit score and earn x6 times the rental cost to be good tenants – if something seems suspicious about an applicant’s details don’t be afraid to ask for further information. Remember that there will be other applicants, and you should never accept just any application for fear of not finding more!