Learn how to conduct a fair background credit check tenant process, review a tenant screening report, and use credit and background checks consistently. Find practical tips and tools at Keyrenter Houston.

How to Do a Background Check on a Tenant

If you are a landlord, you’ll need to conduct tenant background checks to evaluate applicants against written rental criteria. Landlords use a tenant screening process to spot potential red flags, review a credit report, 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 or how tenant screening services fit into the entire rental process. Let’s explore the definition of a tenant background check and what the process consists of.

What Is a Tenant Background Check?

A tenant screening report is a consumer report when it is used for housing eligibility. Landlords should order the report only for a legitimate housing purpose, use the report consistently, and keep the report secure after the tenant screening process is complete.

Put simply, a background check is an overview and screening report that outlines an individual’s criminal records, eviction history, employment history, education history, credit history, and rental history that’s used to screen prospective tenants. A rental background check may also include a credit check, full credit report, address history, past addresses, identity verification, and tenant credit details. Here is an example of what you can expect a background check to show:

• Eviction history, eviction records, and eviction reports when available
• Public records
• Criminal records, criminal reports, criminal background checks, and criminal background information
• Identity verification
• Credit history, credit score, credit report, tenant credit details, and payment patterns that show whether rent is likely to be paid on time

It is in the best interest of the landlord to lease rental properties to applicants who meet objective criteria and can pay rent on time. Screening results can help landlords and property managers evaluate whether a tenant applicant has the credit, income verification, rental history, and complete picture needed for a rental property decision. Landlords should compare rent, income, and debts so the rent obligation makes sense, and property owners should apply the same standards to each potential tenant.

What Does a Tenant Background Check Consist Of? 

Most reports combine several report types rather than relying on one source. A complete tenant screening report may include a full credit report, eviction reports, criminal reports, a sex offender search, identity verification, income verification, address history, and court data from nationwide databases. Landlords can order their own background check workflow through compliant providers, but they should not bypass consent or accuracy rules.

Here are some examples of what you can find out with a tenant background check, credit background check, or screening file:

• 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 application and report.
• The tenant applicant’s income and income verification to ensure it meets your minimum income requirements.
• The tenant applicant’s credit score, full credit report, and credit report history help add more weight to the payment history. The report can also compare rent with income and flag criminal records that need closer review under the same written policy.
• The address history and past addresses help verify rental history and frequent moves. Applicants with no rental history mean landlords are 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 and court records such as tax liens, civil judgments, bankruptcies, or eviction reports.
• Eviction records, eviction reports, and eviction history to help you evaluate the applicant under your written criteria.
• Criminal records, criminal history, criminal convictions, and a sex offender search where legally allowed and relevant to your written screening policy.

How to Check a Tenant’s Background

Now that you know the importance of a tenant background check, tenant background search, and tenant screening report, let’s delve into the steps landlords need to take.

First of All: Ask to Sign Consent

The first step in running a background check is obtaining written consent 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 application form before applicants fill it out; the form can outline your process, explain whether the tenant pays an application or screening fee, and ask for their signature and consent.

You can also create a separate form that seeks their permission for the background check, credit report, and tenant screening report.

Gather Personal Information Via the Rental Application

The potential tenant will also need to fill out a complete 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 for a tenant background search and screening results.

Examples of what to ask for include the applicant’s full name, social security number, date of birth, driver’s license information, income, address history, past addresses, bank statements 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, tenant screening services provider, or property manager. Tenant screening services can provide a screening report with credit and background data, eviction reports, criminal background checks, income verification, identity verification, and nationwide databases. You can expect the background check report to provide information on relevant criminal records, property damage history, and money managing habits. Ideally, the tenant screening report helps landlords feel confident that each applicant was reviewed consistently.

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 process, the turnaround time, and whether you order a full credit report, eviction reports, criminal background checks, a sex offender search, or other tenant screening services. 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 for the tenant screening report and leasing decisions.

Don’t be afraid to seek out additional information, especially if you notice red flags, inaccurate information, move patterns, or missing past addresses on the report. 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

Credit reports usually come from the three major credit bureaus: Equifax, Experian, and TransUnion. If a credit score from a credit report affects the decision, the notice should include required credit score details, the reporting source involved, and the applicant’s right to request a free account copy of the report where applicable. In certain jurisdictions, landlords may also face local screening limits beyond federal rules.

Make sure you are well-versed with the Fair Housing Act, fair housing laws, the Fair Credit Reporting Act, and local laws as you must avoid discrimination and other compliance issues that can cause 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, landlord background check, credit check, or tenant credit review 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 screening process can help you avoid lawsuits. If a credit report or other consumer report affects a denial or other unfavorable decision, provide an adverse action notice with the required credit reporting information. This helps applicants dispute inaccurate information and helps landlords document informed decisions.

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, credit and background checks, criminal background checks, eviction reports, or a sex offender search for one applicant, you must do the same for all prospective renters and prospective tenants.

If your applicant doesn’t have any criminal background issue, it doesn’t necessarily mean they meet every requirement for your rental. You can also opt to run a credit report, tenant credit review, or credit background check to ensure that they meet your financial requirements and credit score threshold. The same holds for the opposite end of the spectrum. If your prospective applicant has criminal records or conviction information, this doesn’t automatically mean they should be rejected. Make sure you factor in all considerations to make informed decisions, 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. Review the report carefully and 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, screening report, and credit report are finished and you’ve had time to look them over, follow these steps.

1. 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 and explain next tenant steps clearly.
2. 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, including rules that protect other tenants and the rental property.
3. 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 easier for property owners, landlords, and new landlords. From inspections to leasing process support, tenant screening services, tenant background search review, credit and background checks, and screening interpretation, 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!