How to Effectively Run a Background Check on a Tenant
Introduction
Running a thorough background check on a prospective tenant is a crucial step in protecting your property and ensuring a harmonious living environment. This article outlines the necessary steps and important considerations, including gathering information, obtaining necessary authorizations, and contacting relevant parties for a comprehensive evaluation.
Gathering Information from the Tenant
Step 1: Completing a Rental Application
The rental application should include comprehensive details about the tenant, such as their full name, social security number, date of birth, contact information, driver’s license number, and any pertinent personal references. It is also essential to gather current and previous addresses, dates of residence, and contact information for current and former landlords. Additionally, including details on current and past employment, banking and credit references, and three personal references is crucial.
Step 2: Requesting a Credit Report Authorization
To comply with the Fair Credit Reporting Act (FCRA), landlords must obtain a completed credit report authorization form from potential tenants before initiating a credit check. If a tenant refuses to sign this form, they risk being denied the opportunity to rent the property.
Step 3: Personal Interview with the Applicant
During the interview, address questions related to the tenant's reasons for moving, pets, smoking habits, living arrangements, and work patterns. Also, assess their ability to cover the first month's rent and security deposit. This personal interaction helps you gauge their compatibility as a tenant and confirms the details provided in the application.
Executing the Background Check
Step 1: Obtaining Credit Reports
A credit report is a reliable tool to assess a tenant’s financial stability and reliability. It reveals important information such as foreclosures, bankruptcies, unlawful detainer lawsuits, and evictions. Credit scores, typically required to be above 620 for rental purposes, are also evaluated from reports generated by TransUnion, Experian, and Equifax. Here, landlords should consider the cost and may opt to charge an application fee to cover the background and credit checks.
Step 2: Conducting a Tenant Screening Background Check
A background check from a verified tenant screening company can reveal critical information about the applicant’s history and conduct. This includes criminal records, landlord references, and payment history. Approved Consumer Reporting Agencies, such as those listed by the Consumer Finance Protection Bureau, should be used. The cost can range from $20 to $50, depending on the depth of the screening.
Step 3: Verifying Employment and Income Information
Contacting the tenant’s current employer to verify income and employment details helps confirm the financial reliability and stability necessary for rent payment. Questions such as employment duration, fixed salary, part-time or full-time status, and current wage can be asked.
Step 4: Checking with Previous Landlords
Speaking with previous landlords provides valuable insights into the tenant’s behavior and reliability as a renter. Ask questions regarding payment history, lease compliance, property damage, and the reasons for tenancy termination.
Step 5: Contacting Personal References
While personal references may have a vested interest, their perspective is invaluable in providing a more comprehensive picture of the tenant’s character. These references can comment on the tenant’s reliability, character, and the likelihood of them being a good tenant for your property.
Conclusion
Conducting a thorough background check ensures the selection of a responsible and reliable tenant, safeguarding your investment and creating a positive living environment. By following these steps, landlords can enhance the overall quality of their tenant pool and mitigate potential risks associated with renting.