Ensuring You Find the Right People For Your Space
Finding reliable and respectful tenants is not a walk in the park, but it's one of the most essential parts of managing a rental property. Scanning through the history of potential tenants will help you identify any red flags and avoid problems associated with dealing with difficult persons. In addition, you'll gain valuable insights into the financial history, criminal background check, rental history and more. A proper tenant background check will help you make informed decisions about who to lease your properties to.
What is a Background check?
A background check is a process for screening prospective tenants before coming to a rental agreement. You can use a professional background screening service to get information on a tenant's rental, eviction, credit and criminal background. When you do a thorough background check on potential clients, you're more likely to identify those who can pay rent when due, take good care of your property and heed the lease agreement's details.
How to Run a Tenant Background Check
Running a background check is not a simple process; it can be time demanding but saves you much more than the consequences of leasing a property to the wrong person. Here's a step-by-step guide to getting started.
1. Get Written Consent from the Tenant
Before you get the required information from tenants, you should align with the Fair Credit Reporting Act, which states that consumers' data cannot be accessed unless, for permissible reasons, you need to provide potential tenants with a consent form to sign.
2. Determine the Correct Information to Obtain
The rental application should be aimed at collecting the following information.
- Date of birth.
- Social Security Number.
- Previous addresses & landlord references.
- Vehicle information.
- Driver's license.
- Government ID.
- Proof of income.
- Contact information.
- Contact Information for three personal references.
The more data you require, the less likely the tenant will be able to forge them.
3. Choose a Reputable Screening Company
Paying for a professional service is advisable to get more information about your tenant. Tenant background checks cost around $20 to $50, depending on the number of items you want them to screen. Go for a company that the Federal Trade Commission approves, as companies require a special license to acquire highly specialized information from consumers. A typical tenant screening report should include the following:
- Credit report.
- Eviction history.
- Rental background.
- Criminal information.
- Sex offense information.
- Employment checks.
- Illegal activity history.
- Terrorism involvement.
- Criteria-based risk score by previous landlords.
Take note that you might only be able to access some of this information based on the area where you are. For example, you can't ask for arrest and conviction records in Oakland and Berkeley, while in Illinois, you can access such records for just the past three years.
4. Run a Credit Check
Most tenant screening services usually include a credit check in their report. However, if yours doesn't, you can check the credit details of potential tenants by requesting a report from credit reporting bureaus like Equifax. A tenant credit check will inform you if prospective tenants have been taken to collection agencies for unpaid utility bills, rent or payday loans. It also explains how they use their checking account, as bad payment habits will significantly affect their credit score.
5. Review References
Anyone can fake their documentation in some way. If you want to be sure about critical information like employment and rental history, call their employer and speak to their previous landlord directly. You can ask the employer how long they've been employed if they earn a fixed salary and the person's current salary.
When you're speaking with their previous landlord, you should try and find out what time and how long the person rented the property, if they were able to pay on time, if there was any property damage to the property and possible reasons why the lease had to end.
Lastly, you should contact their references to learn about the character and lifestyle of the tenant-to-be. Most importantly, you want to find out if the person is reliable and if they're confident in recommending them to a landlord.
6. Be Aware of Local Laws
Each state has specific laws that govern landlords' and tenants' relationships. These laws contain the rights and responsibilities of each group. You must be conversant with the law to avoid violating your tenant's rights. For example, preventing someone from applying to rent space because of their criminal record could be considered discrimination according to the Fair Housing laws.
7. Review the Results
Once you've got the background check results, review all the information provided and evaluate them based on your screening criteria. You can rent to the prospective tenant if the results meet your expectations. However, if the results are short of what you want, you should send out a letter stating three things; the reason for the denial, the name and address of the agency that reported the negative information and a text saying the right of the applicant to request for a free copy of the report from that agency within 60 days.
8. Interview the Applicant
Getting to know the applicant is crucial to determine if they're someone you'll find easy to work with. Ask them why they're moving, if they own any pets, if they smoke, how many people would live with them and what their typical workday is like.
Only some people can become a tenant on your property; some are very difficult to work with, others won't pay your rent as when due, and some would attract trouble to your property. When you perform a tenant background check, you can identify which persons you're most comfortable leasing your property to.