“What Property Managers Should Know About A Tenant Background Report” written by Mike Marko
You have collected a stack of rental applications.
The next step is to qualify and sort the applications to try and find the most qualified renter for the rental properties. That’s where a tenant background report can help.
As a property manager, it is important to know your tenants intimately.
What comes to your mind when you think about getting to know the prospective tenant? If you are thinking about a nice conversation while drinking a fancy cup of tea, then you are wrong. That’s not how to run an effective rental property business.
There is a legal process that should be used when getting the background information of a prospective tenant. That’s why I want to take the time to talk to you about the tenant background report.
Tenant Background Report
Tenant background reports are the best way to determine if the information provided on the rental application is correct. Requiring a tenant background check on every applicant can help to protect your rental property. The background checks normally include checking the background employment and rental history as well as reviewing the credit history of every applying tenant.
Tenants who are not paying bills, have criminal records or got evicted in their previous rented properties will potentially cause problems if you are to rent to them. When you find bad information during the tenant background process this serves as red flags and could eliminate the tenant for consideration of rental of your property.
Uses Of A Background Report
Every property management business must develop a process for doing a complete background check on prospective tenants. Requiring credit reports, and outside company to verify employment, criminal records etc are key parts of the tenant background reports.
When you identify potential renters with red flags on their background reports are often called “bad tenants or not qualified tenants to rent your property. Luckily, the law grants every landlord or property manager the right to check their applicant’s background and credit activities. But in exchange for these privileges, certain guidelines from Fair Credit Act must be followed during a tenant screening.
A property manager can conduct a background check on every applicant as part of the rental screening process and to help them to avoid bad tenants. There are tenant screening companies online and in your neighborhood that offer services to assist you in checking all of the necessary information about your prospective tenants.
Usually, a background check can give you information whether the applying tenant is financially capable of paying rent or not. Aside from that, background reports also give information about the applicant’s rental history, criminal, and eviction records, and employment and personal references.
Tips In Conducting A Background And Credit Check
When conducting tenant screening processes you need to be sure that you follow local and State laws regarding tenant rights and disclosures. Below is an outline to follow when checking a tenant’s background that should help you in following the correct procedures to avoid any violation of the fair screening laws. It’s recommended that you give a rental application form to any applicant along with a credit authorization form.
- Require the applicants to fill your rental application form. In order to conduct a background and credit check, the application form must give you every necessary information about the applicant. The applicant’s legal name, addresses of current and previous employers and landlords, social security number, driver’s license number, and bank account numbers are required before you could conduct a background and credit check.
- Know the law and tenants rights in your area. According to Section 604 of the Fair Credit Reporting Act, a landlord is not allowed to conduct a credit check without the applicant’s permission. To avoid any legal implications you should always have the prospective tenant sign and authorize credit reports on a separate form than the application form. Obtaining a credit report requires signed authorization by the prospective tenant. If an applicant refuses to agree to the credit check, the landlord has the right to deny the rental application right away. The property managers or landlords are responsible for requesting and recording credit check authorizations, not the credit reporting agencies.
- Use the most reliable credit checking companies. I would highly suggest and recommend that you only use the three major credit reporting bureaus to have the most credible results. TransUnion, Equifax, and Experian could give you information such as foreclosures, bankruptcies, unlawful detainer lawsuits, evictions and other credit-related public record events. A credit score will also be provided to better help you in determining the credit status of the prospective tenant. The 3 major credit bureaus have the most detailed and up to date credit and financial information, so why use any other less reliable source?
- Hire a tenant screening company. A reliable tenant screening company will help you to achieve the best results of checking the background of each applicant. Normally a comprehensive background check will give you a state and national criminal report, a sex offender database searches and verification of previous addresses. Companies that do tenant background checks normally charge $20 to $50, depending on the types of background check and how much information needs to be verified to qualify for rental of your properties.
- Contact the previous landlords and of the applicants and ask for references. When the tenant is applying to rent a property they should be required to fill out a rental application. A detailed rental application will ask the prospective tenant to list:
- current and previous employers,
- present and past rental information,
- personal references, and
- any criminal or negative information
- they wish to disclose as part of the application.
It’s important to verify all the information obtained in the rental application. You should contact both present and past landlords, as well as the employers, to verify the information that the applicant has provided in the rental application form. Double checking the information from the application form and background report is not a waste of time because this will ensure you that your property is in the hands of an honest and responsible tenant.
Reminders About The Background Report
When conducting a rental background check you should already have signed authorization from the prospective tenant to do the process. With signed authorization, it’s completely legal to charge an additional fee if you are thinking about charging the applicant for the expenses of conducting a tenant screening.
If the applicant has signed a consent form or letter about the background and credit checks, in most States you have ninety days to conduct a tenant screening. Once you are done with the background check and regardless the decision, a landlord or a property manager is legally required to give a copy of the background and credit report to the applicant. Do check your local and State laws to make sure it is legal to forward copies of any of the reports to the prospective tenant.
Final Thoughts For What To Know About Tenant Background Report
We just talked about the background report and how to order one for your tenant screening. The background report is an important part of the tenant screening process. Follow the background report tips I outlined, and you’ll have a better chance of getting more qualified renters.
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