Finding and renting to reliable tenants is a top priority for any landlord. In addition to vetting applicants using a rental application, landlords should also conduct a background check to ensure they’re leasing to the best candidates possible. But what documents and information are included in a background check, and what laws do landlords need to keep in mind when conducting a check? In this article, we dive into the details that make up a background check and share best practices for landlords to follow when screening their next tenant.
The parts of rental background checks
A successful rental background check involves multiple components that provide insights into a prospective tenant's history, behavior, and reliability. Here are the key components of a comprehensive rental background check:
Credit check: A credit check provides information about a tenant's credit history, including their credit score, payment history, outstanding debts, and bankruptcies. This helps landlords assess a tenant's financial responsibility and ability to pay rent on time.
Criminal history check: A criminal history check reveals if a tenant has any past criminal convictions or pending charges. This helps landlords assess the safety and security risks associated with a prospective tenant.
Employment verification: Employment verification confirms a tenant's employment details, including their job title, employer, and income. This helps landlords verify a tenant's employment stability and ability to afford rent.
Rental history check: A rental history check involves contacting a tenant's previous landlords to gather information about their rental behavior, payment history, and any past evictions. This helps landlords assess a tenant's rental track record and reliability as a renter.
Identity verification: Identity verification involves verifying a tenant's identity through documents such as driver's license, passport, or social security number. This helps landlords confirm a tenant's identity and prevent potential fraud.
Reference checks: Involves contacting a tenant's personal or professional references to gather insights into their character, behavior, and reliability. This helps landlords assess a tenant's suitability as a responsible and trustworthy renter.
Legal rental background checks
As a landlord, it's crucial to be aware of the legal requirements and regulations governing rental background checks to ensure compliance and avoid potential legal issues. Here are some important points to keep in mind:
Fair housing laws: Landlords must comply with federal, state, and local fair housing laws that prohibit discrimination based on protected characteristics such as race, color, religion, sex, national origin, disability, familial status, and more. It's important to conduct rental background checks in a non-discriminatory manner and treat all applicants equally.
Written consent: Landlords must obtain written consent from prospective tenants before conducting a rental background check. This consent should be obtained through a separate document that clearly explains the purpose of the background check and the type of information that will be obtained.
Proper disclosure: Landlords must provide applicants with a written disclosure of their rights under the Fair Credit Reporting Act (FCRA), including the right to dispute inaccurate information and receive a copy of the background check report.
Adverse action notices: If a landlord decides to reject a rental application based on information obtained from a rental background check, they are required to provide the applicant with an adverse action notice. This notice should include the reason for the rejection, the name and contact information of the consumer reporting agency, and information on the applicant's rights to dispute the accuracy of the information.
Data privacy and security: Landlords must ensure the privacy and security of the information obtained during a rental background check. This includes storing and disposing of the information in a secure manner and protecting it from unauthorized access or use.
Local regulations: Landlords should also be aware of any local regulations or ordinances that may affect rental background checks, such as limitations on the use of criminal history or credit information in tenant screening.
Benefits of background checks for renters
Performing comprehensive rental background checks can provide landlords with numerous benefits. Here are some key advantages:
Tenant reliability: Conducting thorough background checks can help landlords assess the reliability of prospective tenants. By reviewing their credit history, criminal records, employment and income verification, and rental history, landlords can make informed decisions about the suitability of applicants. This can reduce the risk of renting to tenants who may have a history of late payments, evictions, or criminal activities.
Property protection: Rental background checks can also help protect the property from potential damages or illegal activities. Screening tenants for criminal history can provide insight into their past behavior and help identify any red flags that may pose a risk to the property or other tenants. Additionally, verifying employment and income can ensure that tenants have the financial means to meet their rent obligations and maintain the property.
Legal compliance: As mentioned earlier, conducting comprehensive rental background checks is essential for legal compliance. By adhering to fair housing laws, obtaining written consent, providing adverse action notices, and following other legal requirements, landlords can protect themselves from potential lawsuits and costly legal disputes.
Tenant quality: Rental background checks can help landlords attract high-quality tenants who are more likely to be responsible, reliable, and long-term renters. Thorough screening processes can help filter out tenants with poor rental history or credit issues, resulting in a higher-quality tenant pool.
Peace of mind: Rental background checks can provide landlords with peace of mind knowing that they have taken steps to mitigate risks associated with renting out their property. It can help landlords feel confident in their tenant selection process and reduce the chances of encountering issues related to unpaid rent, property damage, or legal disputes.
Common challenges and solutions
While rental background checks can be highly beneficial, there are also challenges that landlords may face during the process. Here are some common challenges and their potential solutions:
Limited access to information: Landlords may face challenges in accessing comprehensive and accurate information during the background check process. Some information, such as criminal records or employment verification, may not be readily available or may require additional steps to obtain.
Solution: Landlords can overcome this challenge by using reputable and reliable background screening services or partnering with professional tenant screening companies that have access to comprehensive databases and can provide accurate and up-to-date information.
Legal compliance: Ensuring compliance with federal, state, and local laws and regulations can be complex and challenging. Fair housing laws, in particular, prohibit discrimination based on protected characteristics such as race, religion, gender, disability, and more. Failure to comply with these laws can result in costly legal consequences.
Solution: Landlords can address this challenge by familiarizing themselves with the applicable laws and regulations, obtaining proper consent from tenants, and following standardized screening procedures to avoid any discriminatory practices. Partnering with legal professionals or using established tenant screening companies can also help ensure compliance.
Time and cost: Conducting comprehensive rental background checks can be time-consuming and may involve costs associated with accessing information, conducting credit checks, and verifying employment and rental history.
Solution: Landlords can streamline the process by using online tenant screening services that provide quick and efficient results. While there may be costs involved, landlords can view it as an investment in mitigating risks and protecting their property. They can also consider passing on a portion of the costs to applicants through application fees or other means.
Incomplete or Inaccurate Information: Background check reports may sometimes contain incomplete or inaccurate information, leading to potential misinterpretation or incorrect decision-making.
Solution: Landlords can mitigate this challenge by cross-checking information from multiple sources and verifying the accuracy of the data. It's also essential to provide applicants with the opportunity to dispute any inaccuracies or provide additional information to ensure a fair and accurate assessment.
Privacy concerns: Rental background checks may involve accessing sensitive personal information of applicants, which can raise privacy concerns and legal obligations for landlords.
Solution: Landlords can address privacy concerns by obtaining proper consent from applicants, handling sensitive information securely, and complying with applicable data privacy laws. It's crucial to use reputable and secure tenant screening services that prioritize data privacy and security.
Conducting comprehensive rental background checks is an essential step for landlords to protect their rental properties and ensure a positive rental experience. By being aware of the components of a thorough background check, understanding the benefits, and addressing common challenges, landlords can make informed decisions and select reliable tenants for their properties. Partnering with reputable tenant screening services or legal professionals can also provide added support in conducting reliable and compliant background checks. With careful consideration and implementation of best practices, landlords can safeguard their investments and maintain successful rental properties.