The current digital transformation, accelerated by millennials, has changed the profile of renters and expectations of a more secure, automated and transparent rental process. However, many rental property managers and landlords haven’t caught up with the times. Some still utilize manual processes for income verification and some still use the antiquated “gut-check” to determine whether or not to convert a prospective renter into a tenant. Times have changed and so has the technology to drive the rental application process. With the appropriate technology, property managers and landlords can better understand the renter of today and streamline the verification process in an expedited and cost-efficient manner.
The 21st century worker
The new wave of workers is younger, and they — millennials — now represent the largest segment of the American workforce. As the economy continues to grow, millennials provide the greatest market opportunity for rental companies. While property managers recognize this opportunity, the shift in rental profiles can present unexpected challenges in tenant screening.
The other factor property managers have to account for in qualifying the right renter is the increase of the independent contractor, freelancer and, most recently, the ride-share driver — or as we say, gig economy worker. This is the first time in modern history we’ve witnessed roughly 40 percent of the workforce turning to gig economy jobs. While the reasons workers tap into the gig economy are varied, one thing is certain, millennials and independent workers have a greater tendency to be categorized as “thin or limited credit” consumers. This categorization can limit their ability to find rates and terms commensurate with their credit-worthiness.
Modernizing the rental application process
Proving worthiness to rent can often become a complex and complicated problem for a millennial and gig economy worker. According to survey data by MMR Research, commissioned by Equifax, 55 percent of property managers require a larger deposit and 48 percent require a co-signer for renters with thin histories. These measures, while designed to safeguard the property manager and landlord, can become barriers for a thin credit history renter and ultimately lead to his or her exit from the application process.
To complicate matters further, oftenttimes renters are applying to multiple properties before securing a lease. Multiple housing applications may mean multiple credit inquiries, which can negatively impact the credit score calculated from an already thin credit file.
Solutions to the problem
Over the past several years, Equifax has been laser focused on developing solutions to help with these modern-day issues facing the multi-family industry. For a property manager faced with a thin credit applicant, Equifax provides an automated employment and income verification service that leverages The Work Number®, the largest database of payroll records furnished by thousands of employers nationwide. Additionally, this service can help property managers streamline the application process and combat the potential for fraud.
“Leveraging a third party for employment and income verification enables property managers to keep renters satisfied during the application process, as it can take a property manager a week or more to manually verify an applicant’s data. And that’s too long,” says Tyler Sawyer, vice president of rental and real estate at Equifax.
In addition to verification solutions, Equifax recently announced a soft credit inquiry for tenant screening purposes. Soft credit inquiries generally do not impact a consumer’s credit score like hard inquiries. Instead, they are posted on the consumer’s credit file in a way that is not visible to most financial institutions, tenant screeners, lenders, etc., and are not used to calculate a credit score.
“Offering soft-pull credit inquiries helps renters find the best lease and terms without worrying about negative impacts to their credit score,” says Sawyer. “This becomes invaluable to millennials and gig economy workers who may already have thin credit files.
As the millennial generation and the gig economy continue to solidify their place in the American economy, leveraging income and employment verification and rental-soft inquiry solutions like those offered by Equifax will become ever more important. Property managers and landlords who fail to leverage this level of technology stand a greater chance of missing out on a growing number of opportunities to engage new renters who are just as likely to pay rent on time as anyone else.