Here's What You Need to Know About Selecting Reliable Renters

Selecting strong renters can be the difference between a cash-flowing property or an alligator. Even if you can get a judgment on a tenant that owes you big, collecting on that judgment is not a guarantee.    On this episode, Steve White From RentPrep gives us the scoop on how you, as a landlord, can do the proper due diligence on your applicants to save you time, money, and headaches.  Website: https://rentprep.com/?utm_source=roofstock&utm_medium=podcast&utm_campaign=steve-media-outreach-2021 The "RentPrep for Landlords" Podcast: https://podcasts.apple.com/us/podcast/rentprep-for-landlords/id851540886 The "RentPrep for Landlords" Facebook Group: https://www.facebook.com/groups/RentPrep --- Transcript   Michael: Hey everybody, welcome to another episode of remote real estate investor. I'm Michael Albaum and today I'm joined by Steve White, founder and CEO of rent prep. And today Steve and I are going to be talking about all things tenant background check related. And we're also going to delve into some things that you can do personally to boost your credit score. So there's a lot of fun information in here. Let's jump into it.   Well, Steve White, thanks so much for joining us today, man. Really appreciate you taking the time.   Steve: Yeah. Thanks for having me on. I appreciate it.   Michael: Absolutely. So you're the founder and CEO of rent prep, right practice? Yes, I really want to want to dive into what that is. But I would love to get a little bit about your background first, and how you got into the space?   Steve: Sure, yeah, I'm totally on accident. I never intended to be doing background checks at all. So I, I got out of the Marine Corps, I served eight years took an opposite direction. And most of the guys that I knew that were getting out and becoming police officers, or getting into law enforcement in some way, and I sort of went the corporate america route, and I worked for a company that played a really niche role in a legal process called a replevin order. Nobody's probably ever heard of that. But…   Michael: No, what is that?   Steve: So if you can imagine, as you're driving down the road, and you see these really big, like, street paving machines, that, you know, like construction equipment that are usually like a million dollar piece of equipment, the company, if the company stops paying for it, and the bank wants that piece of equipment back, you can't just go and pick something like that up. And so if you   Michael: Take a put on a tow truck,   Steven: Right, no, it's a huge process, you usually got to break it down into pieces and ship it in on multiple vehicles. So what we were doing was arranging those replevin orders that were that had to be organized in the local municipality. So we would have to coordinate with the sheriff's department and local attorneys and, and get all this stuff organized. So I was doing that, you know, on the corporate side, kind of in the banking world and decided I could do it on my own and started a company that did exactly that. And I started it in 07, which was perfect timing for the big financial recession that happened two years later.   Michael: Right!   Steve: And, yeah, that definitely put a damper on things and made us get really creative for looking outside of the box with different business ideas. And we had a client that that basically came to us and said, hey, I've got rental properties. And you guys are using software to track down pieces of equipment and figure out where you know, where job sites are, where people might be where people might be hiding things, do you think you can tap into that or use some of that same, you know, access that you have to let me know if somebody would be a good tenant or not. And like any good entrepreneur, I said, we can absolutely do that for you before I knew how to do it.   So the business started there really what it is today, and we ended up within about two years selling, we split it up into different divisions, sold the replevin side and put everything into the background screening side. And that's really where we got our start working for usually, at that time, large property management companies, large apartment communities, mostly local, I was, you know, going around knocking on doors and trying to set businesses up.   It wasn't until we started doing, I started doing a lot of speaking engagements at like landlord associations or real estate investor associations, as I started to really see this need for these smaller market landlords to have access to really good screening. And we didn't provide any screening for them at that time. We were just doing this for bigger businesses and larger property management companies. And it seemed crazy to turn away all that business and so we created rent prep as a brand, specifically to give landlords access to really good high-quality screening that typically only the large property management companies are getting.   Michael: Interesting. And so what what type of services reports background checks, can rent prep run?   Michael: Anything that you can imagine in terms of what you would think you would normally get so we're talking credit reports, criminal records, judgments, liens, bankruptcies, eviction records, obviously, address histories, income verifications. So we can reach right into a bank account and get a an average or a summary of data to tell you what their average monthly income is so that you can do a proper income to rent ratio.   And really what makes rent prep different is that we are not always trusting the the courts or the databases to get things correct. So we will live in an age now where if you're somebody like me, my name is Steve White. There are 2600 Steve whites around the country. And in fact, probably somewhere near near you. In California, there's a middle school named Steven M White, which is my exact name. So common names are very common. What we realized was there was a piece missing when you're talking about automating data in that piece is really a human element that you need someone who's trained, who understands the FCRA, which is the compliance arm that that manages our industry, and somebody who can make decisions beyond what, you know, simple filtering can do, and really get better access to data.   So with with the way that we do our screening, we are typically able to find about 50% more eviction records that are filed than what the, you know, what can be found in, let's say, the National eviction database. And so we're in a lot of cases, going directly to the courts in searching, you know, for information, especially if it's a common name, making sure that it is the correct person, anyone that's ever ran a background check for John Smith knows that you're going to spend a good amount of time trying to, you know, determine if it is your john smith, that's a sex offender, or if it's some other john smith, that's a sex offender. So we're taking that responsibility off of the landlord's hands and saying, we'll do that we'll make those determinations, and use our trained eyes to to make sure that you're getting the correct and accurate information.   Michael: Awesome. So this sounds like a service that would be great for somebody that's looking to self manage a small time landlord. But if let's say that's me, I'm I've I have properties and professional property management. And I want to do my own property management now for local properties I own. I've never seen a background check. I've never seen what those reports look like, Is it pretty easy to decipher, and understand and digest that information? Or do I need a technical degree degree to read and digest it?     Steve: Sometimes you feel like you need a technical degree, depending on the person you're running the information on, right?   Michael: How much background they have to show.   Steve: Yeah, yeah, you know, it's funny, because if you get a good tenant, it's really counterintuitive, right? Like, our reports should be super boring.   Michael: Show nothing.   Steve: Yeah, right. Right. A lot of times we get calls from landlords, they're like, yeah, we ran this and nothing came up. Well, that's good. That's, that's what you want. Right? Yeah. Right. But you know, the nice thing is, again, I really my intention is not to come on, and like sell rent Reprep.     Michael: This is this great.   Steve: Yeah, this is really what what I believe separates us from a lot of our competitors in this industry is that for landlords, if they run a background check, and they just say, Hey, I don't know what this means, or I don't look at a lot of credit reports, what, you know, what is this section here? Or really, what is a good credit score, right, so we can offer interpretation. So the landlord can call and speak to the exact screener that built the report and compiled it. So that screener has intimate knowledge of exactly what's on there and helped go through the information with them. We can tell them what the average credit score is for a tenant, which is 650.   Michael: And was that nationwide?   Steve: Yeah, across the country at 649. So, and we can also dive in a little deeper and see, you know, because for one landlord and one property, you know, asking for a minimum credit score of 700 might not be unreasonable. And, and for another landlord and a different property, asking for a 700 might be very unreasonable. And so we want to know, what's the property? Like? What are your you know, what are you getting for rent? What type of tenants are you looking for? and help them try to make a good decision based on what their criteria is.   And every landlords different? Sometimes they know really well with that criteria should be sometimes they know they don't, so we can help kind of guide them in that right direction as well.   Micheal: Oh, that's really interesting. So do you guys collect then, kind of the reverse feed of data with regard to property type and locale and average rent, to then be able to offer that to landlords that come ask you that question?   Steve: It's not something that we're automating. And we're not building that into our reports, although, I feel like you just came up with a really good idea.   Michael: So that one's on me, Steve!   Steve: Right, right. suture idea? They're not, you know, it's really, you know, it's, it's in the moment when they're asking us because we're walking a very clear black and white line, when it comes to report interpretation, we've got to be very careful on our end, we can never make a decision on you know, for landlord. You should or you shouldn't rent to this person, we can only give them based on our experience and based on what their criteria is. So, you know, if a landlord says, you know, I've got this bar and it's pretty high and you know, this, this rental property means a lot to me. I raised my kids in this place, and we moved on and now we're renting it out. And, you know, there's a little bit of an emotional attachment there, and maybe they've got some higher end fixtures that you'd normally see in a rental unit. And so they want to make sure that the quality of tenant they're getting is very high quality.   We'll take that information. And that's how that's exactly how we're interpreting that report for them and saying, either this looks good, or, you know, I look at 200 reports a day. And there's a lot of red flags or risks here and this person doesn't seem to meet the criteria that you're reaching for. So usually, it's it's based on, you know, what the landlord is telling us in that moment, what they're looking for.   Michael: What would be interesting to chasing this rabbit further down this new idea hole is if you collected then eviction records from landlords based on tenants that you had screened, to be able to kind of look at the big data. And if somebody says, what are the most influential characteristics or criteria for a tenant who's going to be evicted? You can have predictive analytics.   Steve: So we do reduce sort of do that right now. There's a feature that, yeah, there's a feature that we have on our credit report, to TransUnion credit report that we're giving a score to that's called a resident score versus a traditional FICO score. And it's taking into consideration exactly like what you just said, there is there are, there are certain patterns and characteristics that people tend to follow who are either good renters and good, good paying renters or not. And so we're waiting, we're weighting those that data a bit different to to generate a little bit of a different score based on knowing that it's built for a rental.   Michael: Interesting. Very interesting. So, Steve, I got to ask the question that might be on everybody's mind. And I mean, all this information sounds really helpful and powerful. And it also sounds expensive. What is it going to cost the landlord to run some of these reports get some of this information?   Steve: Well, again, I feel like you're putting me in the sales man mode. So my sales answer is it's a lot less expensive than an eviction why, right?   Michael: The classic answer!   Steve: Right? Well, listen, you know, in our, our mantra here is always that an ounce of prevention is certainly worth a pound of cure. If you, you know, for landlords, you know, the kiss of death for any landlord is having a bad tenant, I mean, that's the difference between cash flowing positive or not, or having to put a ton of money into repairs, or having to just deal with the headache and nightmare of a bad tenant. You know, we've, we've all heard the horror stories, and a lot of us have seen the pictures that accompany those horror stories, and no, like, I don't ever want that I don't ever want to be in that situation.   So that front end, you know, due diligence that they're doing really is their best chance, especially in today's era, where evictions are next to impossible, if not impossible, depending on what the reasoning is right now. You know, this is the only chance that they have to really, really mitigate that risk is to make a good decision or the best informed decision that they can on the front end. So the cost is relatively inexpensive, and in most states, it's going to probably be less than what they're allowed to charge for application fees. Some states like California and New York, of course, it's going to be potentially outside of what you can charge for an application fee.   So it can range from 1895, for some real basic information, to $38 for a kind of, you know, the full boat of information, and then, and then you can add all kinds of things on there, like the income verification for an extra $10. And those sort of pieces, which are super helpful, because again, you're not you're, especially with the income verification, the last thing you ever want to do is take someone's word for it, or take their information and assume that it is accurate or truthful, and I'm not, I swear to you, I'm not that type of person that has trust issues and doesn't trust them.   But having having done this for a long time, I will tell you that it is far more common than you would probably think, to see doctored credit reports we've seen where the font is slightly different for the score, or you can tell that certain things have been omitted or deleted out paychecks that we've seen that are just completely fabricated. So, you know, with all of our products, we're taking that trust element out and we're you know, we're gathering that data outside of the tenants ability to interfere. So even with our income verification, we're getting that information straight from their bank, not not even their employers because a lot of employers nowadays too are trying to protect their employees information and they won't release salary information to you.   So the only way the only way around that is to go straight to the banks and and start taking a look at how much money is being deposited on a monthly basis. And we can, you know, share all that information with the landlords and tell them exactly what their income is, which may include, you know, we're also in the age of the side hustle. So a lot of people have their job plus their side hustle job and gathering some extra money. And so we want to look at the whole thing, you know, in as a as a, as a total or as a full picture versus, you know, gathering information from one employer and then trusting that they're, they're giving us accurate information about their 1099 side hustle money that's not really trackable, and you just sort of have to take them at their word what they're making on it.   Michael: Sure. Oh, that makes sense. Well, I experienced the horror story with my first tenant $10,000 in damage on the way out and small claims court eviction, the whole nine yards. So I do have trust issues. So I get it. It just, it kills me when people don't go to that level of due diligence, or they cheap out and get the basic and, again, not not promoting Rentprep or any other service, but like, just don't get the cheapest package you can. It's the equivalent of getting a property inspection, we do so much work on the diligence on the physical property, inspecting it, looking through it with a fine tooth comb. Why aren't we doing the same thing with tenants, this is the equivalent. So don't skimp on it, folks. Just pay the 10 bucks the extra 20 bucks and get it run.   Steve: Yeah do it now in a lot of times, that information that you may be skipping out on may hold the key to exactly what you want to avoid. So if you're looking at, for example, you know, property damage, and let's say that tenant that you were talking about that did $10,000 worth of damage. I'm assuming did you end up getting a judgment on them?   Micheal: We did. But collecting on that judgment is a whole nother story.   Steve: I guess I yeah, I could spend an hour talking about just collecting now. And I'll give landlord. I'll give landlord some good tips. And I'll give you a good tip too that might help you collect on that. But you know, that's a good example, like credit reports omitted judgments about three years ago. So judging is no longer included on a credit report at all.   Michael: Wow.   Steve: And it's we can thank our court system for that because no two courts are alike in the country. The courts are like the what courts are like the Wild West, it's the craziest thing you've ever seen. So you can have neighboring counties and different courts. And let's say you and I both owe money to Old Navy, we both got an Old Navy card. And we wanted to spend a ton of money on jeans and T shirts. And we just said let's do a   Michael: They’ve gpt great, great deals.   Steve: Right? So and then we both defaulted on the same day. And Old Navy Old Navy took us both to court on the same day. And we both got a judgment against us on the same day. And my my county court filed the judgment in your county court one county over not even in a different state, but just one county over filed that exact same judgment, same amount, same creditor all the same information, there was a very high chance that my record would end up being reported on my credit and yours would not. So only about 50% of judgments were being recorded on two credit reports which created a really unfair system, because why should I be punished for it right? In New nappy or vice versa. So right, so the credit bureaus decision was okay, the only we can't fix the courts, nobody can seem to do that.   Michael: That's a whole nother issue.   Steve: It is a whole nother issue. But since we can't fix the courts, then the only real fair thing to do here is just leave that information out omit it. And for landlords, you know, that became super dangerous, for obvious reasons of you're not going to be able to see that information, the other dangerous reasons because literally overnight, 22 million people saw almost a 10% increase in their credit score, just because of a you know, back end office move. That doesn't doesn't mean that they're trying to improve because of credit behaviors. But because we eliminated a an adverse piece of information that wasn't going to affect them negatively. So everybody's scores went up.   Michael: Wow. So in a kind of just real world example to paraphrase and make sure I understand this, if I'm I find this Navy Old Navy, credit card user and I went really crazy, like really crazy and I owe a let's say eight grand a month to old neighbor. And my income shows five grand a month getting deposited into my bank account, which is the income verification part of that I have a negative $3,000 a month habit burning a hole in my pocket, but you as the landlord or end user of that report will not see that.   Steve: You will not see any judgments just like the judgment that you have on that that tenant that did $10,000 of damage. Now obviously, as a landlord, you want to tell other landlords like, hey, beware, like, right? Don't let this guy do what he did to me. I wouldn't wish that on anybody. Most landlords have that mindset of, You know, I don't want someone else to have to suffer. But unless that landlord, that new landlord is doing a judgment search specifically, they'll never know about that judgment that you got on that tenant that that judgment will not haunt them, like every tenant, or every landlord wishes that it would in your mind, in your mind when you're going through all the steps to issue that judgment and get it and you finally have in your guess, this is a moral victory. It's a principle win! It's not unless it's unless someone else is looking it up. Otherwise, it's, you know, does it exist? Does a tree fall in the woods? if no one's around to hear it? It's like, you know, is that does that judgment even really exist? If the landlord's not looking for it?     Michael: But so this is a searchable thing that that rent prep can do?   Steve: Yeah, these are civil court record searches that are now emitted from credit reports. But we can reach into the courts and pull those those records out. So yeah, so a deeper dive is certainly worth it, especially in cases like yours.   Michael: Oh, yeah. So Steve, curious to know, in your experience, what are some of those major red flags that somebody who's looking at a red prep or some kind of other background check information report, could see and look to glean and say, Okay, if I'm seeing these four things, are these three things I either need to stop and pause? Or this is a definite non starter for me?   Steve: Well, I'll start right from the application process, because I feel like almost every landlord has run into this situation where somebody doesn't want to give their information. And they're going to claim that it's because they don't want to put their social security number down because they want to keep that private.   Michael: Yep. I've done that as a renter.   Steve: Okay, so now that one or two things are happening here, and it's important that landlords understand this, too. And I'm not saying you were wrong to do that. And you may have been very reasonable to do it. And so   Michael: I'm great renter.   Steve: Yeah, right. Okay, so, perfect point. Great renters want great landlords, right? If you don't trust this person that you're giving your information to, you're not going to give all your information. So part of the what we're doing like with our private Facebook community, or even a lot of our educational content, on rent prep calm, is really talking about how to be a good landlord, because good, the best tenants want good landlords. And if you're, if you're not presenting yourself, well, you're going to run into that more often than you want to where people are closed and don't want to give you the information because they, to be quite honest, they just don't trust you with it.   So that's one thing. The other thing is, what we have seen here and learned here and processing, as many reports, as we do is that more often than not, if somebody does not want to get the information, or if they intentionally give the wrong information, which we see a lot of somebody's flip flops a social security number, or adds a zero where it should be an eight. More often than not, they're they're trying to hide something that they're doing that knowing like, I don't want them to find this information. And it's better to have a no result or can't find the result versus seeing the negative result that would come up.   So I would say, you know, for a landlord, that first red flag is going to be if you start seeing a lot of generic information on a on an application. And, you know, first thing might be check yourself, make sure you're you're not the problem is the landlord like am I am I presenting myself well, and this thing, well, my, my professional and my handling this thing properly? Or do I seem like the type of person that somebody is not going to be comfortable sharing their information with, after the after that I would say, you know, for looking at the actual reports, what those red flags might be, I would set the obvious ones first, if they have a judgment from a previous landlord on their, or a property management company. And the tip I would give landlords is property management companies are obvious, right? It'll be ABC property management or, you know, ABC apartment community or whatever. But if you just see a person's name on there, you know, if it's just a Steven White as the creditor, or the plaintiff, there's a good chance that that's probably a landlord and it's definitely worth either calling the screening company to get a little bit further information, maybe they can help and tell you what it is. But it's not going to show up always as super obvious, like a judgment from Old Navy, or a judgment from ABC property management company.   So keep an eye out when you see individual names like that a lot of times it's it's from a landlord.   Michael: Okay.   Steve: The other one is going to be their their payment history. So if you're looking at a credit report, understand that most people pay things based on priority. If I, you know, that I'm going to collect a late fee, and maybe even have my vehicle repossessed if I don't make the payments on it promptly. I'm going to make sure that I pay that car payment ahead of some other payments, like my dentist bill who, maybe he hits me with a little late fee, maybe not, maybe I can call him and talk to Nancy, you know, the office manager and talk her out of a payment, you know, late fee or something.   But really, it comes to a prioritization. So if you start seeing late payments and a shaky payment history, and it's even for things that I would consider to be high priorities, such as housing, rent, those types of things, that's usually a red flag, too, because if these are high priority items that they can't make timely payments on. That's usually a sign of distress, and not that they're creatively trying to manage their finances and choosing, okay, well, maybe I can pay this thing late this month. But this one's a priority, I need to pay it. So good. renters always prioritize the rent payment, above all else, you know, that's their housing, that's the thing that needs to get paid above their Old Navy bill or buying, you know, beer and smokes for the weekend. So you want to make sure that rent payment is its top priority.   So you're looking for somebody that knows how to prioritize, and evictions, evictions are obvious. You know, that's that probably the single most important piece of data that you can gather to show somebody prior history with renting. Now, the issue with that is, obviously have an eviction moratorium, right now that's going on. You have some states like the wonderful state of New York that I'm in that eliminated evictions from being viewed at all. So landlords cannot even look at an eviction when they're considering or doing their screener in considering a new tenant makes it really tough. It's like, you know, tying one hand behind your pack and trying to trying to fight.   So, but that eviction data is super critical, because evictions don't always you know, what the media or people sometimes portray as sort of a victim situation where somebody, you know, their kid got sick, and they lost their job, and they can't pay their rent, and now they got evicted, you're evicted. And it's tragic. Those are not the typical scenarios, you know, the typical scenario is the guy who has parties and kicked holes in the wall or flushed his socks down the toilet, and, and you don't want to rent to this person or in New York's case, they're in their mind, they're trying to protect tenants. But it's, it's so counterproductive. Because if you if you evicted somebody for being aggressive to a neighbor, or another tenant in a building, and that was the basis for the eviction, now you're eliminating the next landlord to be able to see that information and make that decision and, and putting all the other tenants at risk. So the eviction data is critical. And I would say more often than not, the evictions are not some really sad, tragic story about somebody whose circumstances were well beyond their control and they're, they're a victim of, you know, a broken system. Most of the evictions that we see are certainly well deserved. And landlords need to be aware.   Michael: Yeah. So are we entering now, a new cycle? I mean, whenever evictions, the the moratorium gets lifted, the fact that that information from this stretch of time is not going to be able to be viewed by landlords. Do you? Do you foresee a really tough next rental cycle where landlords are going to be dealing with a lot of crummy tenants because they didn't have access to the full picture?   Steve: For sure. And I would say, you know, the mindset for the terrible mindset in a lot of ways, but I know a lot of businesses have had the mindset of, this pandemic has been rough on business, obviously, some more than others. But I heard somebody say, never let a good pandemic go to waste. Like if you're going to, if you're going to try to make lemonade out of being handed a couple of lemons, you're going to take that opportunity and don't think that tenants aren't going to do the same. So anything that would have been maybe just bad, you know, bad character or bad payment history or being irresponsible now has the easy go to pandemic blame to say like, Well, that was related to the pandemic. And so, you know, you can't count that. So I think a lot of people are going to abuse that, you know, and especially when it comes to evictions, or even just simply their own personal finances. You know, we're seeing that here, pretty much on a daily basis where somebody never lost her employment never took a pay decrease throughout the entire pandemic, but as using the pandemic as a legitimate reason to be able to get out of paying things on time or taking full advantage of it, and so that's gonna, that's gonna take a while to work its way through the system for sure, unfortunately.   Michael: So how can landlords combat that or what is rent prep doing to help landlords combat that?   Steve: Well, one of the things that landlords are going to need to be aware of his credit bureaus themselves are working really hard to hide information. That was pandemic related. And again, you're not going to avoid people who abuse the system, if they're going to be out there. And it's going to happen, unfortunately, but at least you're not putting on putting it on the landlord to have to make that decision.   So the idea is, if we just hide that information, and you don't see it, the landlord can't make a mistake, and, and use a piece of information against somebody that they shouldn't have.   Michael: Got it.   Steve: So at least at least it's holding them, you know, less liable in terms of a compliance error or discriminating against somebody who they shouldn't be. But beyond that, I would say the landlord's like, like always, nothing's really changed, have really good communication, ask a lot of questions. If you see something come up on a report, or credit report or, you know, criminal record or anything, start asking questions.   It's not always a black and white thing, when you're looking at this type of data, it's not always as simple as well, they've got a criminal record. So they must be bad, we're not going to run through them. You know, people change and a lot of times, you know, they don't need to suffer endlessly for a mistake that they made. And a lot of times, they come out a lot better afterwards. And so those conversations are critical for a landlord to be able to say, does this criminal record, really truly impact whether or not this person is going to be a good renter for me or not? And a lot of times, even a criminal record with with some clarity around it may not be as concerning as it as it seems, initially. So good communications to key there.   Michael: Yeah, it's such a great point. And I know for I know, for me, too, as someone who, when I was first looking at credit background checks, that was a big scary one for me, but the fact that you could chat with an account rep at RentPrep and start to have those conversations with the tenant, it doesn't necessarily need to be a non starter, it can be Oh, let's try to understand what's going on. Because you're right, it shouldn't. People's past doesn't need to haunt them for eternity.   Steve: Right. And I'll say this, too, especially when it comes to evictions, we know that the data shows that somebody is three times more likely to be evicted again, once they've been evicted once, hmm, the reason for that is because that fear of the unknown is gone. Right? Like, if you've never gone through an eviction, you don't know what's gonna happen, like, are the police gonna come and throw me out what, you know, I don't want to, I don't want to think have, you know what the potentials are, because I don't know it. And it's scary. Once it's happened, and they know the ins and outs of it, it becomes a lot less scary.   So if you see somebody that had an eviction, five years ago, four years ago, it may not be as big of a red flag, as you might think, you know, number one, they've only had one and not three. So that's, that's a positive, right? But it's always it's always worth the conversation. If you're on the fence, if everything else looks good, and it's this one piece that you're like, I just don't feel great about this. Don't be afraid to call that person up and say, Hey, I saw that you had an eviction on here, talk me through that, what what happened there? And you might find that it was a, something that happened, that's not going to happen again, or something that they learn from and doesn't seem like, you know, it's it's a it's a pattern or something that is going to creep up again.   And so it's always worth having good communication. Background checks are great conversation starters. You know, so rank that way. Yeah.   Michael: Great point. Steve. I'm curious because we were chatting about it a little bit ago that I was someone that never liked when I was renter putting my social security number on on applications. What is the impact for a renter of getting a background check or a credit check? I mean, does that does that affect their credit score? Does that show up as a true inquiry like if you get a new Old Navy credit card for instance?   Steve: Yeah, so thank god TransUnion, who is the In my opinion, the best credit bureau the best one to work with certainly, and I think the ones who really have had their stuff together, you know, working with the all three different credit bureaus TransUnion, as has been the best one for us to work with. And about two, maybe three months ago, they passed, sweeping changes that in the housing industry for rentals that Inquiries were no longer going to be hard inquiries or affect their credit. And this was a huge, huge change, right?   Because if you live in an area like Portland, OR San Francisco or, you know, there seems to be a million of them now, even even if you have perfect credit, the chances of you applying to someplace and getting it on the first shot are almost slim to none like, most people, most people are applying to 10 different places. So and hoping that one of them hits and one of them lands, you know, so Long gone are the days where you put in a rental application with a solid background and you're guaranteed going to get it there's a real high chance that you're going to end up submitting multiple and having multiple background checks ran on you. So TransUnion saw this and and i think handled the issue correctly, which was make it a non issue, it no longer affects anyone's credit to pull their credit for rental purposes.   The way it used to be, was the same rules that applied for anything they want to do eliminate credit fishing. So if you go to Old Navy, and I'm trying to think of some tribal colloquia here and get this local stuff where so you got an Old Navy, and you get a card and Trader Joe's and I don't know, can't think of another one here, but some other, you know, department store or wherever that they're offering you, you know, credit, the Bureau's would see that as this is not good, if this person's applying for all of these things in a short window of time, it's usually an abuse of credit, it's usually what they call fishing. So if you get denied for one credit card, and then the next thing you do is apply for another one, and then another one until you get the credit limit that you want or the line that you want. That was something that they would punish people for. But in the rental industry, obviously, that's not the case, like you could very well apply 5-10 different places and doesn't mean that you're fishing, or you're doing anything weird, it just means you live in a really competitive area that there's more applicants than there is housing.   Michael: Well, that's great. And that's great information to know both as a renter, someone who's going to be potentially renting and also as a landlord to have those conversations with folks that don't want to give your social security number for fear that that that's no longer an issue.   Steve: Yeah, that was a huge deal for us. Because we would deal with a lot of inquiry disputes, which was a real, a real administrative pain for us on the compliance end of things because somebody would say, Hey, you know, I applied to this place, but I didn't think they'd actually pull my credit. And I want to get this credit inquiry off my credit report. And we'd have to go through this really lengthy process with them. And so now that doesn't even exist. It's been Yeah, it was like a real smart, one of those rare times where you're like, Man, that made sense. And in every logical way, and everyone did the right thing. I feel like that just doesn't happen all the time where you're like, we solve the problem efficiently.   Michael: And now it's working.   Steve: Yeah, right. Right. Right. But in that case, TransUnion really did get it right. Beyond that, I would think most people that their reason for not wanting to share their social security number is, you know, they're afraid of who's looking at it, what's going to happen, does this mean that my information is going to get stolen? Right, and the ugly truth that nobody wants to hear, but I see it from a different point of view working on the data side is your information has probably already been stolen. And your your information is far easier to access than anybody would ever wish or hope. That's that's the that's the unfortunate ugly reality that we pretty.   Micheal: It's pretty scary what you can find when just by googling stuff.   Steve: Yeah, yeah, for sure.   Michael: I've got a question, Steve. And then I want to wrap this up. And I don't know if there's a quick answer for this. You tell me if we need to do a homebuyer episode around this. But why in the heck, are there three separate credit agencies to begin with? Why can't we just have one?   Steve: Good question, I think so I can tell you maybe a little bit of the, the genesis of it and the reason why there's three bureaus and why the three bureaus have different scores. That's something that we hear we hear a lot like my TransUnion scores 600 but my Equifax score is 650. Like, why the discrepancy? So So first off, when it comes to scores, those are, especially if we're talking about FIFO. Everyone knows FIFO or is from the word, but FIFO is an actual accounting company. That's fair. Isaac's Fair, Isaac's companies with FIFO stands for. They're a privately held company, and they don't share their algorithm for scoring even with the credit bureaus. So nobody knows the secret sauce of what it is that that goes into it.   So the issue with so many different scores really comes from who's doing the who's doing the algorithms? And what are the what are the scores being based on? So after the big financial crisis in oh eight, the A lot of companies responses to how do we, how do we get back, you know, economically from a recession? And unfortunately, the answer was, well, we should create like a bell curve for credit scores. And so there's different FICO models that have, you could take the exact same information and put it into the model. And depending on the, which version of the FICO model that you're using, if it's an old four model, that would be from 2004, that's what they would consider to be the classic model, then there's an 08 model, which is like the recession model, so you're gonna have a much more inflated number.   And so the answer is that because there's a lot of different industries, so that's the same reason why you have a lot of different scoring models. And the same reason that you have three different credit bureaus is because at one point in time, the credit bureaus, each sort of specialized in an industry. And it's a lot less of that now, they're pretty broad. Some of them might specialize more, that's why sometimes you might have like a Verizon bill that shows up on TransUnion, but not Equifax or something like that. Or some sort of utility bill is usually what we see that shows up on some and not others. So that's the real reason, the reason that there's only three? I don't know. Those became sort of the accepted standard, and anyone else who's created anything, has not had the adoption rate that you would need to legitimize that type of information. And we've seen it over the years.   Michael: A true rating agency.   Steve: Yeah, exactly. So, you know, they've become the standard, they've they carry credibility. Lenders trust them, obviously, landlords trust them, you know, all different industries are trusting them. And so for anyone else to sort of step into the arena and want to create the same thing, it's a really, really high, high barrier to climb over because they're missing all of that credibility that the three bureaus have.   Micheal: sure they're already the three 800 pound gorillas in the room.   Steve: That's it? Yeah. Okay. You know, the one thing that I would say landlords need to be aware of, too, is, you know, I know the government right now has been talking about creating a centralized Bureau, that's something that we're keeping an eye on really, really closely in our industry, and I, I don't necessarily hate the idea, right. Like, I love the idea of standardizing as much as possible, it makes things a lot more accurate. My concern there, especially for landlords is, you know, be really interesting to see how the government achieves that or what their plan is for it. But again, I feel like there's, you know, there's a lot of missed information when you start talking about those types of things.   So what's going to be included? What's not included? Who's actually determining what information is fair or not fair. And again, you know, using New York as an example, the best example I can come up with is those evictions, you know, where New York determines that it's not fair to use them and talk to any landlord here in New York? And they'll tell you, it's absolutely insane. And why shouldn't we use that. So, you know, when you lose that type of control, then you start losing your grip on that type of information that you might be able to make a really well informed decision on. So that would be my concern with with having one central credit, credit bureau is who's determining what gets reported and what's not.   Michael: Makes total sense. And I've got one final question to kind of reward all the listeners who stuck through with us till the very end and understanding fully that we don't know what the secret sauce is, but a question I get all the time, just in life in the Roofstock Academy. How do I boost my credit score? What are some things I can do? Do you have any insight, any tips?   Steve: I do? I do. And it's it's funny, we some, you know, all the screeners here pretty much every employee here at Red prep, we look at so many credit reports we really do where it is our own badge of honor, we probably talked about our own personal credit scores more than the employees normally what. It is like bragging rights, like, Oh, I got my score up over 800 because you sort of see you see how the game is played and what you're trying to do?   So first and foremost, if you are not automating every payment that affects your score, you need to stop what you're doing and do that right now. Go set it up in your bank, or with the with the creditor, whoever it is, whether it be a car payment, whatever, if it affected their reporting, your payments, you need to make sure that you automate those payments so you can never miss a payment even accidentally. That would be first and foremost. Payment History. Bears so much weight on a score, that if you screw it up and you miss a payment, even if it's accidental, even if you have a legitimate reason, even if it's a great reason, it's going to impact your score in ways that you don't want it to. So first and foremost, automate your payments that impact your score and then prioritize from there.   Second would be careful what you apply for, don't think that you can go to five different auto dealerships and apply at five different places. And that's not going to affect your score negatively it will, the rental industry, like we just talked about is about the only industry that you can do that now, sort of fish for credit, anything else, if you do that, that's going to negatively impact your score, even if you get the credit. So, you know, if you apply for three credit cards over a stretch of three months, and you get every credit card that you apply for, that still has the chance to negatively impact your credit score, because too many inquiries for a specific industry.   So if you apply for an auto loan, a mortgage and a credit card all in the same month, it's not going to impact you, that's three inquiries. But if you apply for three credit cards in a month, that's going to impact your credit, because they're all they're all from the same industry. And then I would say, the other thing is carry, depending on your depending on your credit, if you don't have any debts, it's not always a good idea to just pay things off and close them out. So if you don't have a lot of credit bearing accounts, and you just happen to pay everything off, it's for sure a good idea to keep one or two cards, buy some stuff, pay it off monthly, just just so you can generate payment information because no information is not always good either, you know, a lack of information, lack of payment details, what we hear in our, in our industry, we call that a thin file, somebody who just doesn't have a lot of payment information seems like it would be not bad, right? Like, well, it's not bad information. So it must be good. It's not, you know, no information, sometimes it's you know, can damage your score almost as much as bad information.   So keep something you know, keep a credit card, have a low balance, pay it off, but show that you're making payments on it, so that at least it can tick that box every month showing that you're making consistent payments, if you just pay everything off, and there's no record of anything, it won't take long before your score starts slipping.   Michael: Okay. And something that I've heard is to increase credit limits. So that way you end and continue spending the same amount. So your available credit goes up. But the amount you're utilizing stays small.   Steve: Your debt to limit ratio, right, like what you actually owe, and what your limit or ability is to borrow. That is calculated. So if you can, because what you don't want to do is you don't want to be maxed out, or even close to or above 80%. Because that does start to impact your score because they're looking at it as if things go bad. What's your ability to pull yourself out of that situation? If you don't have the available credit to erase that debt that you have? Then you're you're in a bad spot? So yeah, that's a really good point. If you can get a line increase or limit increase, do it worth it. You got to be responsible. I mean, it's like a load.   Oh man I feel dangerous like giving this advice. But yeah, if you're going to be responsible, and you're doing it with that intention, not a bad idea. If you can't be trusted with credit, and you're trying to really repair your your credit, your credit score, you know, then you're good. But for some people, I feel like they, you know, they shouldn't be trusted with a two year limit. It's just yeah, it's bad idea.   Michael: That's, that's that's playing with fire.   Okay, awesome. Well, Steve, I want to be very conscientious of your time. Thank you so much for hanging out with us today and talking to us about RentPrep and just landlord screening in general, what's the best way for folks to either get ahold of you or rent prep or utilize any of the services that that you offer?   Steve: Everything's at RentPrep.com it's a super good resource for landlords to look anything up from tips on how to turn over a property tips for good showings, tips for screening, obviously, and finding the best tenants. And then we've got a private Facebook community that we're really proud of. It's about 12,000 landlords, we will actually not allow landlords, more landlords are not allowed in the group that are allowed in the group we are super picky with who gets in the group and who doesn't. Because we want to try to keep the streets clean and keep it a really safe place for landlords to go and, and share knowledge and help each other out. So there's no no selling in there. You can't be a guru and sell your latest course and that kind of stuff. We want to make sure real landlords and helping each other we see a lot of really great you know, interactions in there, like, you know, somebody has a house fire in their rental property and they're scared to death and don't know what, what's next what to do and, and you'll, you'll see, you know a handful of landlords three or five of them that say, you know this happened to me within the past year, here's what you can expect, here's what you need to do. And so it's filling in those gaps for those landlords and erasing some of that fear of the unknown for them.   So that's our Facebook community, rent prep for landlords, and then also our podcast, which is the rent prep podcast, which I'm sure you can find on iTunes and Stitcher. And we're about 300 plus episodes in tons of great knowledge there. Obviously, you should be listening to Roofstock’s podcasts as well. So I'm not trying to steal your audience or anything. But our podcast is, is hosted by Andrew Schultz, who is a professional property manager. And this guy has seen it all and shares a ton of really, really useful information. And it's a it's a good podcast, if you're a landlord, who is looking for, you know, ways to manage your property better or looking to you know, what's going on in the industry currently.   So that's a good way to connect with us there and live chat call in mean, we're a real company. got real real here. seems crazy nowadays, like many people call us and say like, oh, it caught me off guard, like somebody actually answered the phone. But yeah, we're, you know, we're an old school company, you can call us and talk to somebody, you can reach us on email and live chat and all that sort of stuff. You know, we're here to answer questions. And I would even say, there's no such thing as a crazy question. Here. We get it all.   Michael: So just just crazy people, right?   Steve: Plenty of those.     Michael: Thank you so much for hanging out with us. Really appreciate it. We'll have to have you back on a future episode and take care man.   Steve: Yeah. Thank you. Appreciate you having me on.   Michael: All right, everybody. That was our episode a big, big, big thank you to Steve. This was a lot of fun. I learned a ton. I'm going to be definitely putting a lot of this into practice and look forward to using a lot of these features as I look to self manage a few properties. So again, thank you everybody. If you enjoyed this episode, feel free to leave us a rating or review wherever it is listening to episodes. We love Comments, feedback, additional episodes, ideas on the things that you all want to hear about. We look forward to seeing on the next one. Happy investing.