You know that you need to complete a background check on renters before you sign the lease. A background check can reduce your risk of dealing with issues from damage that requires expensive repairs to having to pester tenants to get rent to having tenants commit crimes on your property.
If you are not sure how to complete a background check on a renter, then just follow these steps.
Gather Information and Permission
Before you do a background check on a renter, you need to make sure that you have all the information and documents you need. You will need your renter’s full name, address, date of birth, and social security number. You will also need them to give you written consent to complete the check. Many landlords just include this as a section in the rental application.
While that is the bare minimum of information, you will also want some other information from the potential tenants to ensure a well-rounded background check. You can gather most of this information on the rental application.
Other information to get includes their driver’s license number, previous addresses with dates of residence, contact information for past and current landlords for any landlord reference letters submitted, their current income and employment with contact information and names, contact information for personal references, and references to complete a credit check.
You will not need all of this information for the background check itself, but the rest will be helpful for the remaining steps in the tenant screening process.
Remember, if a tenant refuses to provide permission for you to complete a background check, you are legally allowed to deny their application.
Get a Credit Report
One key part of the background check will be getting a credit report for the tenant. The credit report provides you with an idea of whether the potential tenant can afford the rent and is likely to pay on time. Look for red flags such as evictions, foreclosures, bankruptcies, or unlawful detainer lawsuits.
Each landlord has slightly different criteria for credit scores, but most look for applicants with scores of above 620.
Keep in mind that if you do not accept a potential tenant due to their credit report, you have to legally send them what is called an “adverse action letter.” This letter lets them know why they were rejected, the agency that issued the credit report (including its name and address), and that the applicant can get a free credit report copy from the agency within 60 days.
Use a Tenant Screening Company
There are various tenant screening companies that are verified and were created to specifically complete background checks for landlords. These should show you whether the applicant has a criminal record or is a sex offender. It will also let you know about past property damage and confirm they paid rent promptly.
When choosing the screening company, make sure you use a Consumer Reporting Agency that is approved, as this is required by the FCRA. RentRedi partners directly with TransUnion to give you a credit, criminal, and eviction report with a customized leasing recommendation.
What to Look for on the Background Check
Once you get the background check on renter applicants, it is time to learn what to do with the information. You want to pay close attention to criminal history and credit report, as well as whether there are any past evictions.
If the applicant has a criminal history, you should not necessarily disqualify them immediately. Pay attention to when the crime occurred and how long ago it was. If it was something minor a decade ago, it should not matter. You should also pay attention to any legal restrictions, such as for sex offenders, and how often the crimes took place.
Always Be Consistent
As part of the Fair Housing Act, you should always ensure that you are consistent when determining what issues on a background check disqualify an applicant. This prevents claims of discrimination and protects you.