For many people, their home and rental property are their top personal investments. Renting out your property is a major source of income, and often a lifeline to a successful retirement. That’s why it’s extremely important that anyone renting out property takes adequate steps to properly screen rental candidates.
3 Reasons to Run a Background Check on Tenants
You can only tell so much about a stranger through conversation. If you want to have a trouble-free experience renting out your property, you want a tenant who is reliable and not a liability. The best way to find the right one is to run their name through a background check.
Safety is a major reason you need to run a background check on a possible leasee. You want to protect yourself, your family, and neighbors from someone with criminal instincts. In rental relationships, arguments often happen. You want to avoid chances of disagreements becoming dangerous situations. A background check lets you know if the rental candidate has any kind of a criminal background or history as a sexual predator.
2. Theft Risks
A background check will show you if the person has a criminal record involving theft and robbery. You don’t want someone on your property stealing from you or your neighbors. Not only would that be dangerous, it could set you up for a lawsuit. If you skip the process of screening a tenant, you could be held legally liable.
3. Screening Applicants
Requesting permission to run a background check can also immediately eliminate unworthy tenants and save you a lot of time. It discourages people from applying who might be trying to hide something. Such an applicant probably won’t respond after you request a background check, or they might deny authorization to run it.
Why Run a Credit Check on Tenants?
First of all, nobody wants a deadbeat tenant. If you’re renting out your property, you want to make sure their monthly payments are on time, and the check won’t bounce. The three credit bureau bureaus—Experian, Equifax, and Trans Union—offer tenant screening services with full credit reports. It’s common for landlords to charge a fee for the credit report along with the rental application. Some states require the landlord to cover the fee.
The beginning part of a credit report will have a negative items section that alerts you to potential red flags. This shows any accounts that are past due, discharged, or turned over to collections. You will also find any record of bankruptcy, eviction, or foreclosure on a home.
A credit report is a very useful resource to predict how reliable the person will be as a tenant. You will see if they have a history of paying their bills late. A history of late payments is the type of behavior that is unlikely to change. If the person has a long record of late or non-payments, you can guarantee that will continue.
4 Steps to Run a Background Check on a Tenant
Step 1: Know the law.
Anyone screening rental candidates should be aware of Fair Housing Laws. Federal law prohibits anyone from denying someone a rental based on discriminatory factors like race, age, gender, or national origin. If you deny someone based on criminal history, you have to prove that you did so based on concern for your property or the safety of yourself and others. You are expected to inform the candidate you are rejecting them because of a valid risk.
Step 2: Know what information you’re paying for.
Many companies offer background check services for a fee. Any paid background check report should include information provided in public records. You will find eviction records, criminal and credit history, and any evictions.
Step 3: Make the prospective tenant aware.
You should let the prospective tenant know up front that you will be running a background check. This is usually stated in most basic rental applications. There are a number of rental application templates you can download for free, or you can draw one up on a Microsoft Office template. It helps to have a social security number to run a complete background check report.
Step 4: Acquire necessary information from the prospective tenant.
Once you’re ready to run a background check on a potential tenant, you will need some basic information to begin. At a bare minimum, in-depth background checks require an individual’s full legal name and their birth date. For the most accurate results, it’s helpful to have a person’s current or previous addresses or their social security number as well.
Top Tenant Background Check Services
There are a few background check services geared toward the needs of landlords. They offer combinations of a background and credit check, as well as previous rental history. The services vary in pricing and unique features that set them apart.
MyRental offers a comprehensive report starting at a subscription price of $19.95. The basic plan provides a criminal background check, a Landlord, Prior Residence, and Eviction Check, and reports any failure to pay rent notices issued in the past. It does not include a credit report or income verification.
RentPrep provides a similar service as MyRental, but has theu added security of live agents who look for gaps that might be missing from a database. The basic service of $18.95 comes with social security number and address verification, Landlord, Prior Residence, and Eviction Check, and reports on judgment, lien, and bankruptcy history. A criminal background check is added for $22.95, and a credit check is an additional $9.95.
LeaseRunner is a service for landlords that is not subscription based but offers a menu of reports to choose from. You can pay $20 for a credit report (run by Experian) that includes previous address and employer verification. A criminal report that covers all 50 states, sex offender registries, and national terrorist watch lists costs $15. A financial report is $10, checks bank account information like balances and withdrawals, and determines if the candidate can afford your lease.
Running Background Checks on Non-Tenants
Background checks are very useful for people other than landlords to run. These days you can never be too careful with whom you’re dealing with. Whether you’re looking for a babysitter or going out on a blind date, there are ways to find out important information on strangers.
Online background check services like CheckThem.com scans billions of public records by a simple keyword search of first and last name. CheckThem.com’s powerful People Search tool can pull up everything from address and contact information, to social media profiles, marriage, divorce, and other court records. By knowing only a name and state of residence, you can obtain a full report in seconds.