Qualification Methodology

Learn about Caretaker's standard operating procedure for qualifying renters.


Background

A traditional property manager starts by deciding what the minimum criteria for a qualified tenant should be. Ideally (to comply with fair housing laws) they post these criteria on their website so that all prospects can easily see them. When a renter expresses interest, they will send them a list of the documents and information (usually some combination of bank statements, pay stubs, and tax returns) needed to verify that the renter meets these criteria. The property manager collects these documents, reviews them, and calls references to verify their authenticity.

Automation is different because software, not humans, is responsible for collecting and verifying the required qualification documents. Renters submit proof of qualification using an online form that was designed to prevent them from moving forward until they've submitted everything that's required. These submissions are verified primarily by software that lets us directly access the source and secondarily by a layer of human air support trained in leasing best practices.

We provide the following recommended tenant qualification criteria for income, credit, and rental history.

  1. Monthly income of at least 3 times the monthly rent, verified by a connected bank account that shows at least six months of regular deposits from the same employer or the last six months of paystubs.
  2. Current employment, verified by a letter validation employment from an employer or a letter from a Certified Public Accountant verifying regular freelance income or income from other sources.
  3. Minimum credit score of 600 verified by a TransUnion SmartMove report ordered in the last 90 days.
  4. No history of eviction

Software-based methods

Screening is one of the areas of work most suited to automation. Making an emotion-based decision or missing a crucial step in a screening checklist can lead to outsized financial repercussions.

We qualify renters using third-party infrastructure that was purpose-built for each category of qualification. Software-based methods remove renter-submitted documents from the process so there is little to no risk of forgeries or otherwise inaccurate data.

Identity

Caretaker works with Stripe to conduct identity verification online. Stripe builds technology that’s used by millions of companies around the world like Amazon, Google, and Zoom. They help with everything from accepting payments to managing subscriptions to verifying identities.

Income

Income verification has traditionally been done using bank statements and tax returns submitted by the applicant. In contrast, Caretaker works with Plaid to directly access the source: bank accounts and employer payroll reports.

Plaid was created to make it easy for a user to safely connect their bank account to a software application. The original use case was so that the user could transfer money from their account. This functionality also makes it easier to analyze account activity, look for patterns in their transaction data to assess how reliably they will pay the rent by verifying their income and their spending history.

Plaid also provides a product that lets applicants connect directly to their payroll provider to verify income and employment status.

When direct validation isn't available, documents like pay stubs, W2s & other tax forms are reviewed manually by a Caretaker support specialist using our document verification checklist.

Credit score and history

Credit score is the output of various data points in a person's financial history. We verify scores directly with TransUnion. Frequently, an applicant comes close to meeting the qualification records but does not because their TransUnion score is slightly below the minimum. In this case, the applicant can request a review and we may deem them to be qualified.

Renter history

Having enough monthly cash flow to pay the rent doesn't always mean that an applicant will be a reliable rent-payer. They may have a tendency to pay late, have a history of leaving without notice with owed rent, or other kinds of lease notifications. We aim to assess the applicant's general reliability as a tenant using indicators from their rental history.

Caretaker checks public court records and one of the largest national evictions databases using TransUnion SmartMove. TransUnion eviction reports include:

  • Tenant judgment for possession and money
  • Unlawful detainers
  • Tenant judgments for rent
  • Failure to pay rent
  • Writs and warrants of eviction report

If any of the above are surfaced, the application triggers a manual review. Our team is trained in techniques for looking closer at these records to get a better understanding of what happened and come to a qualification decision.

Human-assistance process

Our support specialists assist with qualifications in two situations: if the applicant requests it or if something didn't work. Situations that trigger a human review include:

  • Applicant submits a Letter of Explanation. An otherwise perfect credit history can be dragged down by one forgotten store credit card with a $300 balance. In these situations, Caretaker can review the full credit report provided by TransUnion if a review is requested by the applicant.
  • Income can't be determined
  • Applicant doesn't have a credit score

Document verification checklist

  1. Make sure that the applicant uploaded the correct documentation
    • Verify references: A reference can only be used if their role can be independently verified using a reputable third party outlet that the applicant cannot tamper with.

  2. Review the documents to confirm that they substantiate the self-reported income
    • See the policies for document types and content.

  3. Locate and verify the qualification reference
    • Make sure you have the names and contact information that you need. You must find an independent source confirming their role before moving forward with them as a reference.

    • To manually verify a self-employed person's income you will need to make contact with the CPA who provided their CPA letter and/or the clients that make up the bulk of their income.

  4. Email and call the employer directly
    • Determine the income predictability score
      • Income predictability score: Calculate the standard deviation for the last 12 months of monthly salary. A standard deviation of zero represents 100% predictability.

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