Finding reliable and responsible tenants is not easy, but it’s an important part of managing a rental property. A rental tenant background check as part of the application can help you reduce risk and make better decisions.
So, how do you do a background check on a tenant? Let’s walk through the process step-by-step.
Step 1: Get Written Consent
Before conducting a rental tenant background check, make sure you get written consent from the applicant. This is required by federal law under the Fair Credit Reporting Act (FCRA). The easiest way to do this is to include a form along with your rental application. Make sure the person applying signs and dates the form.
Step 2: Collect the Necessary Information
To do a thorough rental tenant background check, you will need certain information, which should be required as part of your application process. This includes:
- Full legal name
- Date of birth
- Social Security number
- Current addresses
- Previous addresses
- Employment information
- References
Step 3: Verify Identity
You also need to verify that the person really is who they say they are. Ask for a government-issued photo ID and compare it to the information on the application.
Step 4: Doing Your Due Diligence
Next, it’s time to play detective. One of your first steps in your investigative process is to run a consumer credit check.
Credit Report
There are three credit reporting agencies (Equifax, Experian, and TransUnion) for personal credit checks. You can work with Command Credit to pull on-demand reports instantly without signing up for a subscription.
When reviewing credit reports for red flags that might indicate problems, look for late payments or delinquencies, low credit scores, bankruptcies, or high debt-to-income ratios.
Rental History
If someone was a problem renter in the past, you need to know. Checking with references from previous landlords can help. Past evictions can be a strong indicator of problems, although you will want to understand the circumstances in which they occurred.
Employment Verification
Contact employers directly to verify the information provided. The best applicants will have job stability and earn enough to pay your rent each month. If someone is self-employed, you should request bank statements or tax returns.
Criminal Background Check
A criminal background check can help uncover relevant offenses, such as violent crimes or property crimes. However, you will want to get legal guidance here. Many states and local jurisdictions have “ban the box” laws that restrict how such information is used, so automatically denying anyone with a criminal history may be illegal.
There may also be local laws regarding using information about sex offender status in making housing decisions.
Acting Upon Information
When thinking about how you do a background check on a tenant, it’s important to know what you should do If you find something that concerns you. You should talk to applicants about the information and listen to their explanations.
If the information ultimately influences you to deny renting to a tenant, you are legally required to provide an adverse action notice.
An adverse action notice under the FCRA requires you to notify applicants of the reason for your decision and information about how to contact the credit reporting agency and dispute any findings.
Staying Compliant with Housing Laws
Best practices to ensure you stay compliant with applicable housing laws and treat potential tenants fairly and accurately include:
- Be consistent: Apply the same screening criteria to all applicants.
- Stay updated: Regularly review and update your screening process to ensure compliance with changing laws.
- Maintain confidentiality: Keep all applicant information secure and confidential.
- Document everything: Keep detailed records of your screening process and decisions.
Conducting a thorough rental tenant background check is important. While it does not provide a guarantee that someone will be a great tenant, it does shift the odds in your favor. However, it’s crucial that you seek legal advice to ensure you are complying with the law at every step.
Trust Command Credit for Rental Tenant Background Checks
Command Credit offers personal credit checks, business credit checks, employment and tenant screening, and public record reports to help you make more informed decisions. You can get access to credit reports instantly from any of the credit reporting agencies or all of them.
Contact Command Credit today to discuss your needs and make better decisions about your rental properties.