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How to Run a Rental Background Check: Keeping You and Your Unit Safe

Renters Warehouse Blog

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2022-12-06

Rental property can be an excellent investment strategy, but you’re only going to enjoy the benefits of rental property investing if you rent your property to a good tenant. 

A good tenant can help you to get the best return on your investment. As a bonus, they can give you peace of mind as well. You’ll sleep well at night, get rent payments when they’re due, and you won’t have to field calls from angry neighbors. The problem is that finding a good tenant can be difficult, especially when you’re first starting out. Potential tenants will usually put their best foot forward and try to demonstrate that they’re qualified renters. But the only way to know for sure whether they’re reliable and trustworthy is by running them through a thorough tenant screening process, including a background check.

But what is a rental background check, exactly? And why does it matter? Finally, how do you go about running one? 

Read on to see why this is one step that you won’t want to skip, and see how running a background check can help you to ensure that only qualified applicants gain access to your rental.

What Is a Rental Background Check?

A rental background check is a general review of the financial, credit, rental, criminal, and employment history of prospective tenants. The background check gives you insight into the history of a prospective tenant and helps you make informed decisions about how qualified they are as a renter.

A rental background check is a screening tool that paints a picture of how responsible an applicant is. When you conduct a background check on prospective renters, you get comprehensive insight into who they are, their behavior, and their history as a renter. This allows you to assess the two things that you should consider when assessing applications: their ability to pay the rent and abide by the terms of the lease.

Here’s a look at some of the things that are usually checked in a background check:

  • Personal Details
  • Address
  • Income
  • Credit Score
  • Address History
  • Employment History
  • Collections
  • Consumer Statements
  • Public Records
  • Evictions
  • Criminal Records
  • And More

A background check puts you on the safe side. Conducting a check on a prospective tenant ensures you’re not taking a financial, security, and legal risk by signing a contract with an unqualified tenant. Moreover, it can also save you time and stress because with a qualified applicant, you’re more likely to get paid on time, helping to keep you from the frustration of having to follow up on unpaid rent, or ultimately evict a tenant.

Looking for more information on renting out your property? Check out: Landlord Checklist: 12 Things You Need to be Prepared for With New Tenants

Why Should You Conduct a Rental Background Check?

A background check is not just a way to gain insight into who a tenant is, it lets you make informed decisions about who you rent your property to. If you still think a tenant background check isn’t worth the money and time spent on the research, here are some reasons you may want to reconsider.

  • To Verify a Tenant’s Identity

First and foremost, the first purpose of a background check is to verify a tenant’s identity.

  • To Help You Gauge a Tenant’s Ability to Follow the Lease

Secondly, a background check gives you insight into a tenant’s ability to abide by the lease and pay the rent. If you find that a tenant has had a history of evictions, for instance, then you might want to avoid renting to them. 

  • To Check an Applicant’s Criminal Record

A background check can also give you insight into a prospective tenant’s criminal record. This check will reveal if renting your property to a prospective tenant would be something that puts you and other tenants in harm’s way. A prospective tenant with a history of violence and drug conviction, for example, may not be a good candidate for a multifamily unit as they could put other tenants at risk. Just remember to ensure that you assess each applicant’s criminal or arrest record on a case-by-case basis. HUD guidance advises against a blanket ban that excludes anyone with a criminal record from renting. Some cities have legislation in place that regulates questions on criminal records in rental applications. 

  • To Uncover Important Information

When you conduct a background check, you uncover a lot of hidden things that the prospective tenants may not want you to know. For example, a credit history check lets you know whether a tenant has a history of defaulting on loans. Also, employment checks let you know if a prospective renter is financially stable. Performing due diligence lets you make informed decisions about renting, which often translates to more stability, better returns, and peace of mind.

  • To Help Reduce Tenant Turnover

While not always the case, generally speaking, good tenants often tend to have longer tenancies, which can help you to keep your vacancy rate low.

Check out: A Landlord’s Guide to Reducing Your Vacancy Rate.

  • For Liability Protection

Running background checks fairly and equally for each potential tenant can also help to protect you from harmful accusations of discrimination. The U.S. fair housing act prevents landlords and property managers from denying applicants based on age, race, sex, and more. Conducting a background check gives you a well-documented reason for rejecting a tenant if you should need one, showing that they were rejected based on a legitimate reason (not meeting income requirements or credit score requirements, for example) and not because of discrimination.

How to Run a Background Check for a Rental Property

Like the popular saying, “knowledge is power,” learning about your potential tenant gives you the knowledge you need to make informed decisions that will impact the profitability of your investment. 

In this section, we’ll see how to check out how to run a renter’s background check.

  • Understand State and Federal Law

Renting out your property requires you to understand local, state, and federal law. This will help you to ensure that you’re aware of your responsibilities as a landlord and will allow you to ensure that your tenant screening process is in line with the Fair Housing Act. This legislation prevents landlords from discriminating against prospective renters because of race, sex, religion, disability, family status, or national origin. Moreover, take note of both the state and local government laws as well. If you don’t have the time to study the law, work with an attorney who is well-versed in the industry. 

  • Process the Application

The first step to conducting a quality background check is to gather information. This initial step gives you access to the information needed for the checks.

At this stage, a potential tenant will be required to fill out the application form to show interest in renting your property. The application form will usually provide the outline of information like name, social security number, address, date of birth, employment information, and so on.

You can get a sample rental application form online if you’re just starting and don’t know what it looks like. Alternatively, if you’re working with a property management company, the property managers will handle this step for you.

  • Ask for Signed Consent

It’s important to note that some aspects of a background check will require the applicant’s permission. After gathering the information needed for the background check, don’t forget to get the permission from the prospective tenant to carry out the check. 

Get a signed consent form from the tenant. One way to do this is by including a section in your application form that highlights your processes and a section for the applicant to append their signature. Another way is to create a separate form that addresses the issue with a section for name and signature. A consent form must clearly state your intention and how this information will be handled.

  • Run the Background Checks

Once you get the information and the applicant’s consent to conduct a background check, you can move forward with the background check.

The information provided in a background check will vary depending on what tenant screening service you use, but here’s a look at what may be included if you opt to run a background check on an applicant:

  • Credit History Check

A credit history check gives you an insight into the overall financial history of the prospective tenant, showing you how well they handle credit. It’s a goldmine of information used to measure the creditworthiness of a prospective tenant. 

A credit history check assigns a score to the applicant based on their credit history. This credit history score ranges between 350 and 850, and the higher the score, the better. A good credit score is generally considered to be between 670 to 739 while 740 to 799 are considered very good and 800 and higher is excellent.

  • Criminal Background Check

A criminal background check reveals arrests or convictions that a prospective renter has had. This check reveals the potential character and behavior of a tenant and helps make an informed decision about them. 

However, you need to be cautious of basing your decision not to rent solely on a criminal record. Ensure you understand the local, state, and federal laws about housing following a criminal background check. If you’re not sure of your understanding of the law, work with a legal counsel or check the U.S. department of housing and urban development (HUD) for guidance on the use of criminal records.


  • Rental History

A rental history record is another important check that will help you make an informed decision on a prospective tenant. This check gives you an insight into the renter’s leasing history. You learn more about the renter’s ability to rent responsibly.


  • Employment and Income Background Check

This stage of the background check gives you a general overview of the applicant’s income source. This check ensures that the applicant has the financial stability to pay for rent. With the employment check, you learn more about where an applicant works, and where their monthly income is coming from. 

To conduct an employment and income background check, contact the applicant’s employer. Verify information about income and work history. 


  • Past Evictions

You should also carry out an eviction check on the applicant. Eviction is the removal of a tenant from a property because of delinquency. Although a history of eviction is a red flag, take a deeper look at the cause of the eviction or even interview the applicant about it before making your decision. Some eviction may be due to causes that were beyond their control such as death, illness, and employment loss. 

On that same note, if a tenant has a history of multiple evictions, that should be a red flag. Someone with a history of multiple evictions may have a high tendency to default again. 


  • Public Records

A look at public records allows you to see a prospective tenant’s bankruptcies, foreclosures, liens, and even lawsuits. This can be useful information that can help you to make an informed decision when it comes to renting to them.



Steps You Should Take in Addition to the Background Check

Now, here’s a look at a few more things you’ll want to ensure that you do in addition to running a background check:

  • Don’t Forget to Check References

Having a stable income source, a good rental history, and a high credit score doesn’t mean a prospective tenant has an excellent character. You should never forget to talk to the applicant’s references and especially, their current landlord. A 20-minute talk with an applicant’s landlord will reveal information and insight that no background checks could reveal. Moreover, it gives you a chance to ask questions about the renter and uncover red flags if there are any.

  • Carefully Document the Process

As a rental property investor, you need to be intentional about everything you do. Make sure you properly document your background check processes and screening criteria. Remember: it’s important to ensure that you treat every applicant the same. This means that if you decide to run extensive research on an applicant, know you’d do the same for all others. Create a level playing ground for all applicants and have evidence for your actions to protect yourself. 

If you don’t have the time to create consistent tenant screening processes yourself, you could always consider hiring a property manager who should already have processes in place and will be able to take the task of tenant screening on for you.

Take a look at: 10 signs you should outsource your property management

  • Let the Applicant Know Your Decision

Finally, take your time to reply to every applicant. If you reject an applicant, let them know right away so they can continue to look for housing. Simply inform them that you have decided to proceed with a different applicant. In most cases, you don’t need to provide a reason for your decision not to proceed with their application.

If you accept an applicant’s offer, send over an application acceptance letter and a lease agreement. In the lease agreement, let them know their responsibilities, the term of the lease, and the dos and don’ts for the rental unit. 

Even though the rental strategy is almost always a great avenue to passive income, the type of tenant you lease your property to will help to determine your success. A background check is as important to a rental property investor as signing a lease agreement with a tenant. 

If you’re looking to rent out your property, make sure you conduct all required checks (employment and income verification, credit check, rental history check, etc.) and make sure you follow state and federal legislation to ensure that you’re operating in a way that’s in compliance with the law.

Want to learn more about rental property investing? Check out the investment tips section of our website and see how you can find success with rental property. 


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