It’s tempting to skip screening tenants, and just accept the first tenant who applies for your property or the tenant that offers you the biggest security deposit.
However, it pays off to background check potential tenants and accept the one that comes out clean. A clean tenant is more likely to take care of your unit, pay rent on time and stay out of trouble.
Collect Information with an Application
At the very least, have all of your tenants fill out a rental application. The application should get the basic information you need to make a decision about this tenant, including information that you can use to perform a background check online and basic contact information like email and phone number. You should collect information about:
Where have they lived?
Find out their last address and landlord. Get contact information for the previous landlord so you can call for references. Ask the potential tenant why they are moving. Is the potential tenant looking for a bigger unit or a cheaper unit? Are they relocating for a job? Were they evicted?
Who will they live with?
Even if there is just one tenant on the lease, you should get the names and past addresses of everyone over the age of 18 who will be living in your unit. It’s important for every person living in your unit to fill out an application. While the primary tenant may have a perfect background, their family may have a seedier past. It’s in your best interest to know who will be living on your property because a court may ask you to defend their actions. In the end, you are the owner of the property, if someone commits a crime in the unit, you will have to answer questions about it.
Where do they work?
Getting paid rent is the primary motivation for landlords. Finding a tenant makes enough money to pay for rent is an important part of that. It’s good to know where your tenants work and how much they make. Ask for their boss’ contact information so that you can confirm the information they give you. Ask your potential tenant about previous employers. If they change jobs often, they may not be able to reliably pay rent.
What’s their history?
The background check will likely include this information. However, you should still ask in the application.
Have you ever:
- Filed for bankruptcy?
- Refused to pay rent?
- Been convicted of a crime? What type of offense? What country and state?
- Been evicted from a tenancy or left owing money? Who was your landlord? What city and state were you renting in?
You should also get the tenant’s written consent to credit and background checks in the application. You have to get consent because it is the law. However, asking potential tenants for consent will discourage tenants with rough credit or backgrounds from applying. That means you’ll less money screening them because they’ve screened themselves out.
Talk to a Past Landlord
While there’s a chance this may be someone pretending to be a landlord, you should still do it. If you do get a real landlord on the line, you might come across some interesting information. Ask the landlord if the tenant was noisy, disruptive or destructive. Why did the tenant move out? Credit and background checks can only give you so much information.
A tenant may have left without a hassle, but been behind on rent. Some landlords would rather avoid going through a tiresome eviction, if possible. Maybe the tenant siphoned water or electricity from other tenants. Or the tenant may have wrecked the unit before leaving.
You would only find out about the issue with a personal conversation.
You wouldn’t learn anything from a fake landlord, but don’t give up the chance to potentially talk to a real one.
Talk to Their Boss
A potential tenant’s boss won’t likely tell you more than whether they work for the company. However, some bosses may accidentally give you more information. For example, they might grunt and groan about the employee, telling you that they are not the best worker. Or a boss might rave about a great employee.
An employee with a great work ethic will likely have a great payment ethic too. An employee with a bad work ethic doesn’t necessarily make for a bad tenant, but it’s something to consider.
Do a Tenant Credit Check
A credit report lets you know if they make late payments, owe a lot of money to credit card companies, or have been sent to collections. Some states allow you to charge applicants a fee to check their credit scores. However, some credit check services charge your tenants for the report directly. The tenant then gives you access on the website to view the credit report. These services are legal in all states.
There are three major credit reporting agencies in the United States: Equifax, Transunion and Experian. You can use one of them to check your potential tenant’s credit worthiness. Other agencies that get credit reports for tenants get their data from one or a combination of the big 3. Therefore, you may as well go straight to the source.
Legally, you have the right to see a potential tenant’s credit score, according to the Fair Credit Reporting Act.
However, there are certain regulations you have to follow:
Tell them if something in the report caused you to decide against them.
You can 100% decline an applicant because they have a poor credit score or because they were sent to a collections agency several times. However, let your tenant know why you ultimately said no. That way, they can work on it. You also need to give your tenant the name, address and phone number of the credit reporting agency you used to get the report.
Give the potential tenant the report.
If you have the report you might as well give the potential tenant a copy, whether they paid for it or not.
You need the potential tenant’s consent.
A potential tenant will have to fill out a written consent form. Otherwise, the reporting agency cannot legally give you the information.
Do a Tenant Background Check
A background check will confirm whether a landlord has evicted your tenant in the past, any legal battles for unpaid rent or other financial matters, or if they have a criminal record. Background checks protect you from liability, they keep neighboring tenants safe, discourage applicants who are hiding things from you, confirm what the application says and help you find great tenants.
Unfortunately, the information that a tenant gives you in an application can be incomplete or false. They may give you the phone number of a landlord they had a great relationship with, while not mentioning the landlord they had a bad relationship with. Worse, they may list a friend’s phone number as a reference in place of the landlord’s. While some of the questions you ask on the applications may not be deal breakers for you, they should be if your tenant lies about them. (For example, a criminal history may not bother you, but why did the tenant lie about it on their application?)
Of the above credit reporting agencies, Transunion and Experian also provide background screenings.
According to the Department of Housing and Urban Development, you cannot deny an applicant because they have been arrested. An arrest does not mean that a person engaged in any sort of illegal activity. Therefore, you cannot penalize them.
You must make sure that your reasons for rejection are standard across the board. For that reason, you should give all prospective tenants a list of criteria you will use to deny them. This is to protect you from tenants who may accuse you of violating the Fair Housing Act. Otherwise, you may be accused of inconsistently applying rules.
Have a Face-to-Face Conversation with the Potential Tenant
Talking to a potential tenant in person gives them to explain anything you find in their screening. Some landlords are willing to overlook certain negative things that come up in the screening because of the way the tenant explains the circumstance.
Additionally, meeting with a tenant in person helps you understand their attitude. What will it be like to deal with them on a daily basis? It’s better to figure out that the person who passed your screening is a pain to deal with before they move into your unit. And it’s great to learn someone you might have written off would actually be a great fit for your unit.