How to run a background check on tenants

The time, expense, paperwork and follow-up required to run a background check may seem intimidating. But if you want to find the best tenants possible, a tenant background check is an important part of the application process that you can’t afford to skip. 

Although you don’t legally have to conduct one, performing a background check puts you in a better position to make an informed decision about which tenants to welcome and which to weed out. Here’s everything you need to know about why it’s important, what things to look out for, and how to run a background check on a tenant. 

What is a background check and why is it important?

A tenant background check is a comprehensive, big-picture insight into an applicant’s financial life, past criminal behavior (if applicable), and rental history to help you determine if you’ll rent to them. When you conduct a background check you can verify that an applicant is who they say they are and reduce the risk of criminal activity and even evictions. This will help you protect your property, your other tenants, and your neighbors. 

This process also gives you a good understanding of whether or not a renter is responsible enough to pay the rent on time and in full every month. Lastly, background checks can protect you from potential lawsuits, costly disputes, and becoming a victim of rental scams. 

What to look for in a tenant background check

Knowing what to look for in the different sections of a background check can help you spot red flags. Here’s what you should pay attention to:

Rental history

Look for a consistent history of on-time rent payments, responsible property maintenance, and positive interactions with previous landlords. If you notice any past evictions, landlord complaints, or a record of a broken lease, those are also signs you should investigate further or move onto the next applicant instead. 

Credit history

An applicant's credit history reveals important details such as their credit score, payment history, outstanding debts, and any past bankruptcies or delinquencies. A tenant with a strong credit history will likely be responsible and pay rent on time whereas a tenant with a poor credit history may not be as reliable.

Criminal history

Considering almost 77 million Americans have a criminal record, it’s in your best interest to review every applicant’s criminal history. Doing so can uncover any potential safety risks and reveal if they have any convictions or arrests. While having a criminal history alone is not a legal reason for automatically rejecting their application, you can consider the nature and severity of the offense, how recently it occurred, and whether it poses a potential risk to other tenants or property. However, if you decide to ultimately disqualify a tenant based on their criminal history, it must be done in accordance with local, state, and fair housing laws. 

Employment history

More than 80% of landlords have discovered that applicants falsify pay stubs, employment references, and income details on rental applications. Watch out for discrepancies between the information provided by the applicant and what is found in employment verification records. Inconsistencies or gaps in employment dates, along with frequent job changes are also good reasons to proceed with caution. 

How to run a background check on a tenant

1. Get signed consent

Under federal law, you must obtain written consent from an applicant before you run a background check. You can include a consent form in the application or have applicants sign a separate form. Regardless of how you request their permission, the form should explicitly state that the scope of the background check encompasses all relevant information necessary for tenant screening, covering criminal history, eviction records, and credit report. For transparency reasons, it should also include details about the applicant's rights in the process.  

2. Gather necessary information from the applicant

Once you have the applicant's written consent, it’s time to collect additional details to round out their candidacy. While you can pick and choose what information to collect, a thorough rental application should include the tenant's full name, Social Security number, date of birth, and current address. You can also ask them to provide information about their employment and financial status to help you gauge whether or not they will be able to afford rent. 

3. Choose a reliable screening service

When it comes to screening tenants, look for screening services that are approved by the Federal Trade Commission (FTC) and other trustworthy agencies. To find a reliable service, you can read Google Reviews or TrustRadius reviews, ask your network of real estate professionals what services they use, and do your due diligence by comparing different options. 

4. Incorporate a credit check into the background screening process 

In addition to running a background check, a credit check (which can be obtained directly from one of the three major credit  bureaus) can provide extra peace of mind by revealing any financial issues. It gives you a good idea of how financially responsible and reliable a prospective tenant will be, including information about their past payment behavior, outstanding debts, and creditworthiness. 

5. Check references

If you choose not to use a professional screening service, consider alternate means like reference checks to verify the information the tenant-provided information to ensure it’s accurate. Doing so will help mitigate the risk of rental fraud and minimize potential liabilities. To confirm the tenant’s rental and employment history, you can call their previous landlords or employers. 

Relevant laws about background checks all landlords should know

As a landlord, you must be well-versed in the laws governing tenant screening as failure to comply with them could result in fines or civil liabilities. Here’s the ones you should be aware of: 

Fair Credit Reporting Act (FCRA)

The FCRA regulates how consumer reporting agencies handle and report consumers' personal information. When obtaining background checks on tenants, you are obligated to comply with FCRA guidelines to ensure accuracy, fairness, and privacy protection.

Fair Housing Act (FHA)

According to the FHA, it is illegal to discriminate against an applicant based on race, color, religion, sex, national origin, familial status, or disability in housing-related activities. 

Americans with Disabilities Act (ADA)

The ADA prohibits discrimination against individuals with disabilities in employment, transportation, public accommodations, communications, and governmental activities. You must make reasonable accommodations during the application process for applicants with disabilities.

State and local laws

In addition to federal laws, state and local laws may impose additional requirements governing tenant background checks. These laws may include restrictions on the use of criminal history, limits on application fees, and requirements for providing applicants with adverse action notices.

Streamline your tenant background check process with RentSpree

With so many moving parts to a rental background check, consider streamlining the process with solutions like RentSpree. RentSpree includes a full online rental application, a TransUnion SmartMove report, a criminal background check, and a nationwide eviction report. Our tools are designed to simplify the screening process for you and empower you to make fast, confident decisions about your next renter. 

Curious to see it in action? Reach out today.