Updated November 2020
For landlords, following the correct protocol when screening and selecting new tenants is essential. If you’re Googling, “How to background check a potential tenant?” you’re already off to a good start.
That’s because not every landlord does a background check on a prospective tenant, and skipping the background check can leave you without critical information. Effective screening of potential tenants can only be successful if you have the right information.
How do you run a tenant background check? Why will the information provided by the background check help you to improve your rental business? Today, you can find out!
Table Of Contents For Running A Tenant Background Check
- Why You Should Background Check Potential Tenants
- Steps: How To Run A Background Check On A Tenant
- FAQs: Tenant Background Checks
Before you get into the step-by-step of how to incorporate tenant background checks into your screening process, it is important to know why this step can help you. Screening tenants properly is incredibly important for landlords; background checks help that process.
What’s In A Background Check?
Firstly, do you know what is typically found in a background check? Many new landlords confuse background checks with credit scores. While there is some overlap, the information provided differs.
A tenant credit check or credit report is a screening report that brings together limited data about the potential tenant’s finances. This may include:
- Debt account minimum payments
- Credit score
- Credit history
- Late payment record
- Relevant court documents
The exact information provided in a credit check will depend on what service or software is used to gather the information.
Background checks have a wider berth than credit checks. Like credit checks, the information gathered will depend on what service is used to generate the background check. Beyond just the financial specifics, background checks give an idea of the tenant’s overall situation and trustworthiness.
When getting a background check from RentPrep, it may include:
- Credit score
- Employment history
- Address history
- Public and criminal records
- Eviction cases
- Consumer statements, if applicable in the state
- Credit inquiries
- Active and closed collections
What Can The Information In A Background Check Tell You?
The information found in a background check on potential tenants will give you an idea of the tenant you are considering. You can get an idea of what type of tenant they are, how likely they are to pay rent on time, and what their history with financial and legal situations has been. All of this information is important while screening tenants.
If any of the information the tenant gave you conflicts with what you find in the background check, you can consider that a major red flag.
Depending on what specific information you believe will help you make the best tenant selections, you can choose a background check service that will give you that exact information.
Now, it’s time for you to learn more about how to run a background check on a tenant.
Here are bullet points on what you’ll need to run a background check on a potential tenant.
- Signed Consent – How To Do A Background Check On A Tenant
- Understand What You Want When You Run A Background Check On A Tenant
- Decide On Tenant Involvement
- Sign Up For A Background Check Service
- Order A Report
The list above is a clickable table of contents that will shoot you down this post to each subject, where you can find more details on each section.
It is illegal to run a background check on a tenant applicant without their signed consent.
Many (but not all) rental applications have verbiage that the applicant gives permission to a background check.
Here’s what that section looks like on the RentPrep rental application.
If you’ve already accepted a rental application, but you do not have a section giving permission to run a background check, you’ll want to use a separate release form.
This way, your applicant won’t have to fill out an entirely new application to give signed consent.
Here’s the release form we use here at RentPrep.
Once you have signed consent, you can move to the next step in running a background check.
Not every service is equal. Each service has pros and cons and you can read about the differences between background check services.
The most important thing is that the service you use provides solid eviction data.
In our opinion, it’s the easiest piece of data to look for to see if your tenant screening service is legit.
Here’s why …
A TransUnion study shows that a tenant applicant with a reportable eviction on record is more than 2.5 times likely to be evicted compared to a tenant applicant with no evictions on record.
As a landlord, you don’t want to go through an eviction, so make sure your background service provides eviction data.
If they don’t provide eviction data in the basic package or they’re trying to up-sell nationwide eviction data, you will want to look elsewhere.
At RentPrep, we cross-reference multiple eviction databases to make sure our eviction data is as thorough and accurate as possible.
This is a simple step but worth your consideration.
Some services require tenant involvement and others have zero tenant involvement.
We actually provide both types of services here at RentPrep and that’s because different landlords have different needs.
We offer TransUnion Full Credit Report, formerly known as SmartMove, for landlords who want a full credit report and the ability to charge the tenant applicant for the report.
However, this will require tenant involvement.
Here’s a few reasons why tenant involvement can be frustrating:
- Hurts conversion
- Slows down process (potentially)
- Does your applicant have internet access?
Our data shows that about 70% of these requested reports are completed. This means 30% of the time the tenant doesn’t complete the background check.
The tenant also will dictate how quickly the report gets turned around. If they take a week to reply, the report will take a week to get done.
Lastly, if your applicant doesn’t have an email address, access to the internet, or has poor computer skills, then a service with zero tenant involvement might be a better fit.
Here at RentPrep, our Basic, Pro, and Platinum tenant screening reports require zero tenant involvement while our TransUnion Full Credit Report, formerly known as SmartMove, package requires tenant involvement.
You can compare those packages here.
This step is simple. One thing to be aware of is that some services charge a monthly fee no matter if you use them or not.
We recommend sticking with a service that uses a “pay as you go” model.
Also, you’ll want to make sure your service is using a secure website.
When you’re on the sign-up page where you’re entering your information, look at the url bar at the top of the page and make sure there is a secure lock.
On chrome (on our sign-up page), it will look something like this.
That green lock lets you know the website is secure and your information is encrypted. This is a small step but always worth a look.
How to order a report all depends on the service you use.
If you’re interested in ordering a report through RentPrep, this page will show you how to sign up and order a report.
If you need help reading your report or have questions with tenant screening, click our Live Chat button at the bottom of the screen to connect with one of our FCRA Certified Screeners.
How Do I Do A Background Check On A Potential Tenant?
By visiting the top of this guide, you can get a complete rundown of the five steps necessary to complete a background check on tenants. It’s important that you follow the process from start to finish.
In a simplified way, however, you can run a background check by signing up for a qualified background check service such as the RentPrep Background Check service that we offer. Comprehensive services like ours will ensure you are able to do everything by the book with ease.
From start to finish, you’ll get the information you need to choose the right tenant.
What Does Potential Tenant Mean?
The phrase “potential tenant” refers to an applicant who has applied to live at your real estate and is awaiting your decision. They are a potential tenant because you have not yet signed a lease agreement, but they may become the tenant for your property.
It is possible to have more than one potential tenant at a time. Ultimately, it will be up to you to decide which tenant is going to be the right fit for your business and property.
What Is The Best Background Check For Tenant Screening?
The comprehensive TransUnion Full Credit Report, formerly known as SmartMove report that we offer here at RentPrep gives you all of the following reports:
- a Full Credit Report
- a ResidentScore and
- a Rental Background Check
The combination of the information found in these three documents gives you everything you need to make the best decisions about potential tenants. If you only need to gather the background check, we also offer that package individually.
Though our services are some of the most comprehensive on the market, there are a number of ways you can find out what you need to about tenants through a background check. Check out these 11 background check services as a great starting point for your search.
What Does A Background Check Show For Renting?
Typically, a background check for potential tenants shows some or all of the following information:
- County And State Criminal Records
While a criminal record does not prevent you from renting, some states allow certain criminal record information to be used as a deciding factor when choosing tenants.
- Sex Offender Registry Check
If the state allows it, background checks may include information about any existing offenses against potential tenants.
- Credit Report
This aspect of the background check allows you to get an idea of how financially responsible a tenant is.
- Employment And Income Verification
Paycheck stubs or another type of income proof may be included in a background check to ensure the tenant can afford the rental price.
- Eviction History
Some background checks include this information if it is on the public record. If it’s not, it may be in your best interest to ask previous landlords if eviction was ever a concern.
When collecting and reviewing all of this information, you as a landlord must continue to follow the rules of the Fair Housing Act. This means that you can in no way base your decision on the basis of color, religion, marital status, age, national origin, disability, gender, or pregnancy.
How Far Back Does A Background Check Go For Rental Applicants?
There is not a set amount of time that a background check will cover. Background check services like ours here at RentPrep will include as much history as is legally allowed in the state where the property is located.
For some of the information that is gathered in a background report, however, FCRA consumer rules only allow 7 years of history. Items like the criminal background check can no longer be included after that time has passed.
If the landlord decides to research and gather the information themselves, however, they will be able to see that information for as long as it is a part of the public record.
How Can A Potential Tenant Be Denied?
As previously mentioned, tenants may not be denied for anything outlined in the Fair Housing Act. Be sure that you are familiar with the terms of the rules on housing discrimination. If you deny a tenant for one of these reasons, you may face legal action against you.
Tenants can be denied for other information found in their background check:
- Credit report
- Criminal history
- Any information that isn’t protected under the Fair Housing Act or state laws
When rejecting a tenant’s application, you should always tell them the specific reason why you made this rental decision. This will prevent any miscommunications and allow the tenant to resubmit an application or explain situational things as necessary.
Run Your Background Checks On Potential Tenants To Ensure Future Success
Using background checks to your advantage is a great way to improve your tenant screening process. No matter how great your rental property is, you cannot find success as a landlord without having successful tenant-landlord relationships, and those relationships are going to be based on having the right tenants.
Use the tools available to you to ensure you are always choosing the right tenant for your property. By doing so, you are ensuring your future success.