Landlords and property owners want good tenants. Tenants who maintain the property they rent, coexist with neighbors, pay their rent on time and have the financial means to fulfill their contractual obligations, and are not involved in any untoward or criminal activities. But how do you ensure you have safe tenants and mitigate risk to your property’s value? Screening prospective tenants by running background and credit checks is an excellent way to determine the best tenants for your property.
The difference between background checks and credit checks
A background check helps establish whether a tenant has a criminal record, prior eviction notices, or even previous cases of fraudulent behavior. A credit check, on the other hand, helps assess the tenant’s ability to pay their bills and fulfill their contractual obligations. Here are seven important checks to take into account when screening future tenants.
1) Credit score
In 2014, the Central Bank of the UAE created Al Etihad Credit Bureau (AECB). The bureau collects and aggregates credit information from multiple utility companies, financial institutions, and government sources, creating a credit score rating for individuals and businesses in the UAE. The bureau generates four types of credit-related reports and scores:
- Credit Score (basic)
- Credit Report (detailed)
- Credit Report with Score (detailed)
- Credit Report with Score for Companies (detailed)
Once a prospective tenant consents to a credit check, landlords can use the reports from the credit bureau to assess open and closed credit cards, payments, late payments, and gauge monetary patterns. The amount of information can be overwhelming, particularly for landlords not used to the system. So we advise focusing on the following:
- AECB scores individuals and businesses from 300-900. A prospective tenant with a score below 550 could signal financial risk. You could also raise your minimum score to ensure you only accommodate tenants that are a good match for you.
- Some tenants tend to conveniently omit past addresses. However, with the tenant credit check, you can see this information. Take it upon yourself to check whether the address they indicated on the application matches the one on the report.
- Multiple applications for credit with lending institutions could indicate that the tenant might be facing steep financial issues. They might not be able to commit to your payment terms.
- Payment history for contracts helps establish whether tenants are disciplined when it comes to payments. If they occasionally default, chances are they will bring the same baggage to you. Being behind on payments is also a red flag, as the prospective tenant might have more financial problems they have not disclosed.
2) Criminal records
Obtaining a Certificate of Good Conduct is an easy process with Dubai Police, so you should ask your tenant for this before deciding whether they are fit to lease your property. Although not mandatory by law, you could make it a criterion for your screening process. This will ensure you mitigate the risk of leasing your property to someone with a criminal past.
3) Medical history
If you don’t want your apartment being put under quarantine as a result of infectious diseases, request medical test results. This may come as an outrageous request but it may help avert disastrous tidings. Ensure they get the medical report from a government-approved medical center. Fortunately, most expats in Dubai already have a medical report completed as a requirement of their visas. So, most won't have a problem providing it to a potential new landlord.
4) Credit and background checks in their home country
Sometimes, a local good conduct certificate might not provide enough history, particularly if your tenant is a young expat who has recently moved to Dubai. In such cases, it might be prudent to request a background check or Certificate of Good Conduct from the tenant’s home country. Some of these reports might still be sent by registered mail, so account for delivery times.
5) Social networks
Social media is a powerful tool to do your own background check on your prospective tenants. Check out their public profiles to ensure their history and information shared on forms is accurate. This includes previous and current employment, address, etc.
6) Calling previous landlords
Just like references on a résumé, a great way to learn about your prospective tenant is to speak to their previous landlords. Their behavior will usually be carried over from their previous residence. However, remember to take everything with a grain of salt. The previous landlord may stretch the truth and give a stellar review, just because they are looking to get rid of a bad tenant. While speaking to them, ask the following questions:
- When did the tenant live there?
- Did they pay on time?
- Were they served any legal notices?
- Did they have any pets?
- Did they damage the property?
- Was the property cleaned by the tenant before they vacated?
- Did they give proper notice before vacating?
- Would you rent to them again?
7) Employment verification
Last, but not least, is verifying a prospective tenants’ income. You could call their employer and speak to the Human Resource manager to verify such information. When conversing with the employer, try to find out the following:
- How long has the potential tenant been employed there?
- How much does the tenant earn?
- Are they working part-time or full-time?
In conclusion
A tenant credit check and background check is the forecast of troublesome tenant behavior. When renting a property through Airbnb, or a similar service, it is not certain that tenants are screened at all. Make sure you know who is staying in your space. At Blueground, we take care of the tenant screening for you. Acting as the landlords ourselves, we ensure that all tenants have been vetted. Through careful tenant screening, you can easily avoid many issues.
More than 60% of landlords in Dubai strongly believe that background checks are as important as credit checks. Background checks act as a safety measure, while credit reports establish financial capability. Both are important and should never be skipped.
Especially in a dynamic city like Dubai, with a constantly moving population, tenant background and credit checks are worth the hassle to avoid any potential hazards and ensure you are renting out your apartment to the best possible tenant.
