Through the use of rental payment data in conjunction with credit scores in the screening process, ALCO Management, Inc. was able to create a more efficient and consistent screening process and improve the ability to identify the highest-quality residents. ALCO was able to accept 12 percent more applicants based on their rental history data instead of just their credit history alone.

Challenge/Objective

Relying heavily on outside sources to provide information on an applicant’s credit score, the ALCO Management team was concerned with the time needed for new information to be reflected on a credit report and how the time-lapse negatively impacted leasing practices and procedures. Further influencing the accuracy and timeliness of a prospective resident’s rental application was the time-consuming and open-to-human-interpretation practice of manual residency verification by the company’s on-site leasing staff. In an effort to combat these concerns, ALCO took proactive measures and sought out a solution that delivered real-time information that could be scored systematically and reduce the time-consuming manual process of landlord reference checks.

Resolution

“Our solution was to incorporate rental payment history data from Experian RentBureau® with our credit screening criteria,” says Michael Johnson, Executive Vice President and Chief Administrative Officer for ALCO, a Memphis, Tenn.–based property management company of a conventional and government-assisted apartment portfolio primarily in the southeastern United States. “In 2009 we also started furnishing our properties’ rental payment information to Experian RentBureau directly from our property management accounting system each night.”

In addition to receiving data on its own residents, ALCO gained access, through its resident screening provider, to a database of rental payment history data updated every 24 hours from more than 4,000 other communities, thus improving the ability to identify high-quality residents, evaluate the risk associated with poor rental prospects and increase the size of their applicant pool.

Result

The results ALCO has realized impact every aspect of its operations, from reducing the administrative burden of conducting manual verification calls to improving capabilities to evaluate “healthy risk” for each individual applicant. One of the biggest impacts has been the ability for ALCO to establish greater consistency over leasing procedures and still retain customizable practices.

“We have the ability to individualize the screening criteria for each property by assigning a weight to the rental history information,” says Johnson. “For example, we may set the criteria to accept an applicant who has no credit or limited credit if they have a positive rental history. Depending on the market, we may take applicants who have a history of paying their rent even if they have a history of not paying some other bill. The rental payment data is integrated in the screening process and a recommendation to accept or reject the applicant is delivered without my staff trying to interpret the data themselves.  This gives me consistency in reviewing applications.”

ALCO has seen the same benefits across its entire portfolio regardless of conventional or affordable status. The data has enabled the company to structure its screening and leasing criteria not just on property type, but by local market conditions. “In a strong market, I want the best applicants available based on credit and rental history payments. In a weaker market, I may give more reliance to the rental history than the overall credit. We know that we are accepting 12 percent more applicants based on their rental history data than just on credit history alone.”