How to Run a Background Check on a Tenant in Your Rental Property

When it comes to renting out your rental property , choosing the right tenant is one of the most important decisions you will make, which is why it’s important to understand how to run a background check on a tenant. By evaluating a potential tenant’s financial history, rental behavior and criminal record, you can protect your property from potential damage and yourself from financial loss, as well as contribute to a safe and peaceful living environment if you have other tenants.

A financial advisor can help you decide how a rental property can fit into your overall financial or retirement plan.

Why It’s Important to Run a Background Check on a Tenant

Running a background check on a potential tenant can help you protect both your rental property and yourself as a landlord, by helping you select a tenant who will respect your property and fulfill their lease obligations.

By reviewing their credit history, you can identify any patterns of late payments, significant debts, or bankruptcies. This will help you predict whether the tenant will be able to pay rent consistently and on time, reducing your risk of financial loss due to missed payments or eviction proceedings.

Contacting previous landlords also gives you insight into the tenant's behavior in past rental situations, such as adhering to lease terms, caring for the property and being respectful towards neighbors. This helps you avoid tenants who may cause damage, violate lease agreements, or create disturbances.

Checking the criminal history of a potential tenant also helps you ensure the safety of your property, other tenants and yourself. This is particularly important in multifamily properties, where the actions of one tenant can impact the entire community.

Elements of a Comprehensive Background Check on a Tenant

Start With an Application

The application should gather essential information, including the applicant’s full name, social security number and contact information. You should also request details about their employment history, income and previous rental addresses. Make sure to include a section where the applicant consents to the background check, which is legally necessary in many jurisdictions.

Conduct a Credit Check

A credit check provides a snapshot of the applicant's financial health. Through a credit report, you can access their credit score, as well as view outstanding debts, credit card balances, loan history and payment habits. Late payments, high debt levels and bankruptcies are red flags that may indicate potential financial instability.

Criminal Background Check

Running a criminal background check involves searching national and local databases for any criminal records. It can reveal past convictions, including felonies, misdemeanors and any pending charges. It’s important to understand the legal constraints and fair housing laws that apply to using criminal history in tenant selection. For example, certain minor offenses or older convictions may not be permissible grounds for rejection. Using services that aggregate data from various sources ensures a more comprehensive check.

Verify Employment and Income

Verifying the tenant's employment status and income confirms that the applicant has a stable job and sufficient income to afford the rent. Request recent pay stubs, tax returns or a letter from their employer to substantiate their income claims. You may also want to contact the employer directly to confirm employment details and duration. Consistent income and stable employment history indicate financial reliability and lower the risk of rental payment issues. Many landlords set a requirement that the tenant’s income should be at least three times the monthly rent.

Contact Previous Landlords

Speaking with previous landlords offers firsthand insight into the applicant’s rental behavior. When contacting former landlords, inquire about the tenant's payment history, how they treated the property, and if there were any lease violations. Ask if the landlord would rent to the tenant again, as this is a strong indicator of their reliability. Previous landlords can also provide information on any disputes or legal actions related to the tenant.

How to Run a Background Check on a Tenant

Choosing a background check service can help landlords screen potential tenants. Here are eight common background check services that landlords use:

• TransUnion SmartMove offers comprehensive tenant screening services, including credit reports, criminal background checks, and eviction history. It provides detailed insights into an applicant’s financial and rental history, and is known for its easy-to-use interface and quick turnaround times.
• Experian Connect allows landlords to access the applicant’s credit report directly from Experian. It provides a detailed credit history, including credit scores, payment history, and debt levels.
• RentPrep offers a range of tenant screening services tailored to the needs of landlords. Their services include credit checks, criminal background checks, eviction history, and employment verification. RentPrep also provides a manual screening option where a team member reviews the data, ensuring accuracy and thoroughness.
• MyRental , powered by CoreLogic, provides a comprehensive tenant screening solution including credit reports, criminal background checks, eviction history and a tenant score that predicts the likelihood of lease default.
• TurboTenant is an all-in-one property management tool that includes credit checks, criminal background checks and eviction history reports.
• Cozy , now part of Apartments.com, provides a range of property management services, including tenant screening. Landlords can access credit reports, criminal background checks and eviction history.
• Zillow Rental Manager offers tenant screening services as part of its property management tools. Landlords can order credit reports, background checks, and eviction history reports through the platform. Zillow Rental Manager is integrated with Zillow’s rental listing service, providing a seamless experience for landlords.
• Buildium is a property management software that includes tenant screening services, offering credit checks, criminal background checks and eviction history reports.

Bottom Line

Running a comprehensive background check on potential tenants is an essential part of renting a property . It ensures you select tenants who are financially responsible, reliable and respectful of your property. By thoroughly evaluating an applicant's credit history, rental behavior and criminal background, you can minimize some of the risks associated with a rental property , and avoid potential issues that could lead to financial losses or property damage.

Tips for Managing a Rental Property

• A financial advisor can help you decide how a rental property can fit into your overall financial or retirement plan. Finding a financial advisor doesn't have to be hard. SmartAsset's free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you're ready to find an advisor who can help you achieve your financial goals, get started now .
• If you'd like to invest in a rental property without owning it, you might consider a real estate investment trust (REIT) instead. A REIT owns and manages real estate investment properties while paying out dividends to investors.

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