Credit Scores and Other Sources May Be the Best Substitute for Criminal Histories for Tenant Screening. Here’s why:
Since early April, when HUD’s general counsel, Helen Kanovsky, issued her blockbuster critique of criminal histories for tenant screening (http://tinyurl.com/h6jt9gj), owners and managers have scrambled to figure out whether, and how, to use these histories to weed-out dangerous prospective residents.
Some have opted for a timid “wait-and-see” approach, hoping that case law will provide guidance; others have decided merely to follow the Kanovsky directive not to use arrest records. Still others have laboriously prepared their own grids, measuring inherently dangerous criminal backgrounds against the time lapses between the offenses and the application and the possibility of rehabilitation.
The FICO Scoring System. This is a numeric representation of a person’s credit profile that lenders use to predict the likelihood that a borrower will repay a loan or credit card balance. The FICO mortgage range is 300 to 850; higher scores indicate lower credit risk, and a FICO score in the low- to mid-600s is considered fair credit.
Applicants With Serious Criminal Histories Have Low FICO Scores and Negative Rental Histories. A local Twin Cities tenant-screening firm, Rental History Reports, conducted a one-year analysis of all rental property types to correlate criminal activity and other factors that typically result in a denied lease decision. Here are the major findings:
- Applicants with serious criminal records – e.g., felony convictions — have lower credit risk scores. Specifically, RHR found that people with felony histories are more than twice as likely to have a credit score below 600, compared to applicants with no criminal histories.
- Applicants with such criminal records are 300 percent more likely to have an eviction history. Thus, a conviction record, without considering the applicant’s criminal history, can result in denial.
- The presence of a “negative” rental history – “skip,” “would not re-rent,” “left owing money,” “multiple lease violations” – is twice as likely for prospects with a criminal history.
- FICO scores lower than 600, coupled with eviction histories, negative rental references, and housing and utility collections, directly correlates to the presence of a high-level criminal history and other denial decision factors.
Bottom line: Various screening devices – FICO scores, evictions and other rental histories, by themselves or in combinations – can be used to predict applicant quality without relying on criminal histories.