Gathering information about a prospective tenant and running a background check is an essential step for any landlord or property manager. What information do background checks reveal?
Background checks can show a tenant’s past payment history, and how good or bad a credit risk they are. They can also reveal if the tenant has been convicted of a crime in the past, and if there have been prior evictions.
The first thing to do is to have the tenant complete an application. Basic information should include name, current address, phone, and drivers license (make a copy of the license). The application should also include previous addresses, employment information (past and present), income, banking references, and contact information for 3 personal references.
Interview the tenant in person. Questions to ask include finding out why they are moving, do they smoke, do they have pets (and how many and what type), who else will be living with them or visiting frequently, and if their work schedule is unusual. You also want to find out if they can pay the first month’s rent and security deposit before they move in.
Tenant applicants should also complete a form authorizing a credit check. Landlords must ask permission before performing a credit check, per the Fair Credit Reporting Act. If an applicant refuses to sign the authorization, a landlord can deny the ability to rent the unit.
Run the credit check with the three major credit bureaus. The credit check will show you late payments, prior evictions, and other information along with a credit score. Typically, a credit score of 620 is required to rent an apartment. If you deny a tenant a rental due to their credit score, you are obligated to send them a notice of adverse action. The notice should contain the reason for the rejection, the name and address of the agency reporting negative information, and the applicant’s right to obtain a free copy of the report if requested within sixty days.
Pull a background check on the tenant applicant. You must use an accredited Consumer Reporting Agency to obtain a background check. These run anywhere between $20 and $50. You can request that the tenant pay the cost of the background check. You can find a list of approved Consumer Reporting Agencies from the Consumer Finance Protection Bureau.
Contact the applicant’s employer to verify employment. Contact their references. And contact their previous landlords. You want to find out if there has been any difficulty in previous rentals, and verify their income.
It may seem like a lot of work, but taking care to completely check out a prospective tenant will ensure a much smoother experience later on. When you properly screen tenants, you build good relationships, and a solid rental community that will generate low vacancies and dependable income.