Product Review - RegistryScorex

A new concept has impacted and simplified the task of the multi-housing rental agent: the use of a numerical score (typically based on credit information) to screen housing applicants. It's not an entirely new idea--mortgagers, insurers and other real estate people have been using Fair, Isaac & Co.'s credit scores (called FICO scores) for a number of years. But scoring models have recently become the vogue among rental agents because a numerical score is thought to be better than the agent's intuition in selecting tenants. It's also less likely to get the Fair Housing agency riled up about the possibility of a biased selection.

Now there's an even better mousetrap, claims First American Registry Inc., the Rockville, MD-based provider of RegistryScorex, a screening tool for the multifamily industry. Why do they claim that Scorex is a better tool? It's the only scoring model that provides landlord/tenant court records on a nationwide scale, says the firm's Larry Feld.

That is the crucial difference between Scorex and other scoring models, Feld says, because studies have shown that the most important indicator of whether or not an applicant is going to pay rent on time is if they have paid rent on time in the past. "And landlord/tenant court records are the single strongest predictors because they reveal whether the applicant has failed to pay rent in the past, been evicted or accused of damaging rental property," he notes.

First American now contains in its database the court records on some 33 million potential applicants, and the number is growing daily as the company's personnel inundate civil courts in every major city each week to gather records of delinquent tenants.

The company was started nearly 20 years ago by a young student named Steve Rabbit, who was doing research in a local court for a paper at the University of Maryland. He happened to notice landlord/tenant court filings--the Failure to Pay Rents and Unlawful Detainers--and because the information was in the public domain, he brought it to his building owner and asked, "Would this be of value to you in judging whether you were going to lease to a prospective resident?" Her response was an enthusiastic yes.

Based on that, he started supplying court records to housing owners and managers in the Washington, DC area. Two decades later, the business has evolved and grown; become computerized; integrated its court records with credit-bureau reports and the applicants' data; and most recently introduced Scorex, its numerical score feature that helps identify high-risk applicants.

When on-line technologies kicked in some years ago, First American became the first resident-qualifying agency to offer access to court and credit information over the Internet, notes Feld, leading to the speedy responses the company now boasts. In 1998, Registry became part of the First American Corp., a $2-billion company listed on the New York Stock Exchange. Today, First American Registry boasts among its clients some of the largest multifamily companies in the country, including Aimco, Equity Property Management, Pinnacle and Southern Management.

Wouldn't eviction information come out eventually in the credit reports that most rental agents today routinely request, we asked. "No," states Feld. "There is a time lapse of some 90 to 100 days between when an owner files Failure to Pay Rent or Unlawful Detainment papers in court and when the credit bureau receives notice of any action. And in those 90 to 100 days, that high-risk applicant may be busy looking for a new apartment."

Or perhaps, in those 90 to 100 days, the applicant may have settled with the owner or a collection agency, in which case, the credit bureau will never hear about his court records. "Sometimes a deal is worked out between the tenant and the collection agency," explains Feld. "The collection agency will accept 75 cents on the dollar and split it with the management company. Then the whole legal process dies and nothing gets reported anywhere. Only five out of 100 court filings ever make it to a credit bureau report."

What's more, "many high-risk tenants know how this system works," Feld points out. "They know that anyone who uses a credit bureau report exclusively to determine whether or not they're going to house this person is going to get this information late--if at all."

But First American's personnel will have already picked up the filing record from civil court, and it is stored in the company's database whether there has been any resolution or not. With offices nationwide, First American Registry covers court filings in 80% of all major US population areas, an important advantage in this age of swift relocations, says Feld. "If someone from New York applies for residency in Las Vegas, it's important for the rental agent to know their record in the area where they used to reside."

In 1986, Experian, one of the country's three major credit bureaus, decided to partner with First American. Together, Experian and First American designed RegistryScorex, which offers a number of individual or combined reports to clients.

"We generally recommend that renting agents get a credit report and a registry check report, which is our core product and includes the landlord/tenant courts records," says Feld. "These two components--the credit report and the national registry check--comprise Scorex. The criminal check is a separate item."

This is how the scoring model works: The rental agent logs in, using a personal ID, password and property ID. The agent inputs the applicant's name, social security number, current address, employment information (including salary) and the cost of the rental unit applied for--into a standard onscreen form. The type of search is selected (registry check, Scorex, credit report and work check), and then with a click, the information is submitted to the First American database.

Using a hypothetical company, this reporter timed how long it took before a response popped up on-screen, and indeed, in no more than one minute, a report appeared. It gave all previous addresses, verified work information and credit information and gave our applicant a score of 206 out of 300. This score put our applicant well into the acceptable range.

The decision-making scale can be adjusted according to the state of the economy, points out Feld. "Supposing the occupancy rate suddenly drops," says the First American executive. "A property manager or company decision-maker can lower the decision point to make more applicants acceptable. They would be accepting more risk, but minimally. Conversely, if their housing community is back up to 98% occupancy, the manager can raise the bar."

This reporter found the Scorex system to be user-friendly and efficient. It requires no prior training. The rapid pop-up of significant information appeared to be an advantage in making a swift decision while the applicant was still in the rental office. The numerical score provided a comfort level for decision-making, and the knowledge that the extensive records of landlord/tenant court filings would help rout out troublemakers was a most reassuring element.

Readers can contact the writer at jeverhart@globest.com