You are reading: How to Do a Background Check on a Tenant
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It can be one of your worst nightmares. As a landlord or property manager, let’s say you’re happily renting out your property to a tenant you are sure is genuine, only to discover they are a fraudster or criminal.
Finding responsible tenants who pay their monthly rent on time is a big concern for landlords today. In fact, many landlords have noted significant rental income loss as a primary pain point in recent years. Unfortunately, if you find you’re renting out to a scammer, it can lead to costly problems.
This post is for multi-family property managers and landlords concerned about tenant fraud in their rental application process. Keep reading if you are suspicious about a few recent tenants and you want to implement better strategies to run background checks, ensure they are a good fit, and proactively identify rental application fraud.
Step-By-Step Process: How to Run a Background Check on a Tenant
By conducting a background check, landlords can ensure that potential renters are dependable, honest, and reliable. It can also shed light on whether a candidate has a good rental history and is not a threat to the rental unit or the surrounding community.
Additionally, background checks can decrease legal risk and help circumvent property damage, saving lots of frustration and headaches. Comprehensive in nature, background checks commonly include:
- Credit score
- Address history
- Employment history
- Public records
- Eviction records
- Criminal records
It’s essential to review each section of a background check report thoroughly. Just because someone has a reasonable credit score doesn’t mean there aren’t other red flags within the background check results.
Here are some key steps to take when gearing up to do a background check on a tenant:
Know the laws. To be compliant with the Fair Housing Act, it’s essential to understand the laws and know what you can and can’t do. Landlords can’t, for instance, run a background check simply related to race or gender. And they can’t run a check and reject a prospective renter based on age or sexual orientation.
Get written permission. Before a property manager or landlord can run a background check on a renter, they must get written consent from the individual. Remember that if a renter is unaware of the background check, it’s illegal. Many property managers add a section in the rental application that asks specifically for a tenant’s signature and consent.
Gather the renter’s personal information. To run a background check, the tenant’s name and social security number are required.
Find the right tools. Fortunately, a wide range of background check tools and services are available today. Whichever service you pick, be sure it’s approved by the Federal Trade Commission (FCC).
Prepare to pay a fee. Typically, background checks cost an average of $15 – $40, depending on which service you use. Some landlords take care of this fee, while others require the applicant to pay.
Know how the results will impact your ultimate decision. It’s a good idea to have a simple strategy in mind related to the information uncovered from a background check and how it will impact your decision.
Why are Background Checks Important for Property Managers?
Background checks help identify potential renters with a history of late payments, evictions, or, even worse, criminal activity. The information uncovered from a background check helps landlords make educated and informed decisions about who can be considered ideal tenants, minimizing the risk of financial loss.
Another advantage is that background checks can help property managers better spot excellent renters who are more likely to pay rent on time, take care of the property, and serve as good neighbors, ultimately reducing turnover rates.
Also, background checks can help ensure the safety of other nearby renters and the property. When you identify an applicant with a history of criminal activity, you can avoid issues that could compromise other tenants or lead to property damage.
Background Check Services You Can Use
Here are some background check websites to consider, in no particular order, with some pros and cons listed for each:
- Free for landlords to use
- Immediate access to results
- 100% online
- Evictions not listed if the tenant moved before the court date
- Renters still have to pay for the background check report, even if they’re not selected
- Collections are not detailed in the report
- Free for landlords to use (Note: applicants/renters pay for background checks)
- An estimated 26 million people visit the website monthly
- Some have reported poor user reviews
- Commercial properties not included
- Most results available in under 24 hours
- Provides international background checks
- Some users report inaccuracies
- Common names can delay background check results
Other Screening Checks You Should Implement
There are several other elements that every landlord or property manager should include in their screening process toolbox. As noted in a previous post, we suggest including at least the following additional checks:
- Credit check
- Rental history and references
- Employment verification
- ID verification
- Rental application
- Interview questions
Learn More About Your Future Tenants
With the rate of applicants falsifying financial documents and using them to apply for apartment rentals on the rise, it’s in a landlord’s best interest to lease rental properties to individuals who will pay rent on time and keep your property clean and in excellent condition.
Background checks can help uncover crucial information about future tenants and provide detailed insight into their past. With this approach, even if an applicant fails to mention something negative about their past, such as an eviction, it will most definitely rear its ugly head on their background check, saving future stress and headaches over time.