If you are a landlord, you’ll need to conduct tenant background checks to determine which tenants are suitable for your property. This is an easy way to spot potential red flags and avoid frustrating problems in the future. If you’re a new landlord, you might not know how to do a background check on tenants. Let’s explore the definition of a tenant background check and what the process consists of.
What Is a Tenant Background Check?
Put simply, a background check is an overview that outlines an individual’s criminal, eviction, employment, and education history that’s used to screen prospective tenants. Here is an example of what you can expect a background check to show:
- Eviction history
- Public records
- Criminal history
- Identity verification
- Credit history
It is in the best interest of the landlord to lease rental properties to tenants who will be able to pay rent on time. They should also keep your property as clean as possible and in mint condition. While it is impossible to guarantee the behavior of a tenant, you can increase the chances of a respectful tenant by opting for a background check. Having all of the information upfront can help you determine who is a good fit.
What Does a Tenant Background Check Consist Of?
Here are some examples of what you can find out with a background check:
- Personal details such as first and last name, date of birth, phone number, and social security number.
- Tenant’s current address; make sure it matches the information on the rental application.
- The tenant applicant’s income to ensure it meets your minimum income requirements.
- The tenant applicant’s credit score helps to add more weight to the payment history.
- The address history helps to verify signs of a stable renter. Applicants with no rental history mean you’re taking on more risk.
- Employment history helps verify previous and current employer information.
- Collections history, meaning if a renter has a tradeline that doesn’t get paid, the account may be sent to collections.
- Consumer statements (or in this case, a tenant applicant). This is either an account-specific dispute or a general statement.
- Credit inquiries like if your applicant applied for an auto loan with a bank.
- Public records such as tax liens, civil judgments, or bankruptcies.
- Eviction records to help you determine how good the renter will be in the future.
- Criminal records to help you get an idea of how the individual will be as a tenant.
How to Check a Tenant’s Background
Now that you know the importance of a tenant background check, let’s delve into the steps you need to take.
First of All: Ask to Sign Consent
The first step in running a background check is obtaining written content from your prospective tenant. It’s important to note that it is illegal to run a background check without the permission of your potential tenant. One simple way to alert them is to include a section on your rental application that outlines your process and asks for their signature and consent. You can also create a separate form that seeks their permission for the background check.
Gather Personal Information Via the Rental Application
The potential tenant will also need to fill out a complete rental application. You can get a sample application online from your local real estate association. This application will provide an outline to collect the necessary information to help you determine if he or she will be a good tenant. Examples of what to ask for in an application include the applicant’s full name, social security number, date of birth, driver’s license information, income, address history, bank or credit statements, and personal references.
Choose a Tenant Screening Company or Hire a Property Manager
Once the application is filled out, you’ll want to work with a tenant screening company or hire a property manager. Tenant screening services can provide insight into how an applicant would be as a renter. You can expect the background check to provide information on any criminal history, property damage, and money managing habits. Ideally, the background check will help you find honest, respectful, and reliable tenants.
In terms of how much a background check costs, they can run anywhere from $50-$100 depending on what you want to include in the screening. You can cover the costs yourself although it is not uncommon to ask tenants to pay the application fee.
Gather Additional Information from the Applicant’s Employer and Previous Landlords
Part of your background check may ask your applicant to provide previous landlord or employment references. By talking with the applicant’s employer and any previous landlords, you get additional context into how they would act as a renter and as a person in general. Don’t be afraid to seek out additional information, especially if you notice red flags that appear on the check. If you still have questions after talking to the applicant’s previous landlords or employers, you can always ask the applicant directly.
Mind the Laws
Make sure you are well-versed with the Fair Housing Act as you must avoid discrimination and other compliance issues that can cause you trouble. For example, you are not allowed to decide on a tenant solely based on the gender or race of the applicant. It’s also important to keep in mind that you cannot run a background check just to use it as a means to reject someone based on age or sexual orientation.
It is important to note that carefully documenting the process can help you avoid lawsuits. Also, be sure that every denial includes an application denial letter with the reason of denial, as the most common rental-related lawsuits occur because of an illegal denial of an applicant.
How Should You Treat the Results of the Background Check?
Consistency is key when it comes to leveling the playing field for your applicants. If you choose to run a background check with additional screens and checks for one applicant, you must do the same for all of your prospective tenants.
If your applicant doesn’t have any criminal history, it doesn’t necessarily make them a good fit for your rental. You can also opt to run a credit report to ensure that they meet your financial requirements. The same holds for the opposite end of the spectrum. If your prospective applicant has a criminal record, this doesn’t automatically mean they aren’t a good fit for your property. Make sure you factor in all considerations to help you make your decision, particularly as it relates to fair housing guidelines.
For example, many formerly incarcerated individuals have a difficult time securing a place to live solely based on background checks. Consider some of the following factors:
- How long ago did the crime occur?
- How severe was the crime?
- How often did they commit the crime?
- What are the legal restrictions of the individual?
What to Do After a Background Check
As soon as the background check is finished and you’ve had the time to look it over, follow these steps.
- Let the prospective renter know one way or another: If you are approving the application, send over the lease agreement and the official acceptance letter. You’ll also want to request the security deposit.
- Create a rental lease agreement that complies with both local and federal laws. A rental lease agreement should also outline the responsibilities and rights of both the landlord and the tenant.
- Sign and date the lease agreement. Once both parties have done so and the security deposit has been paid, it becomes legally binding.
Keyrenter Houston Can Help!
It can be challenging to find the right tenants for your property, but our residential property management services in Houston make it easy! From inspections to leasing to tenant screening, our professional team at Keyrenter Houston can help with nearly any facet of property management. For additional information, please contact us to learn more about how we can help!