In a recent NMHC survey, 70.7% of property owners found an increase in application fraud in the past year. That false information led to an average of $800,000 in bad debt.
24.5% of landlords said it caused non-payment of rent. 73% said it affected their eviction filings.
Read on to learn how to conduct a thorough tenant background check and block this growing threat.
Get Consent
Always get written consent before performing any background checks. It's required under the FCRA or Fair Credit Reporting Act and many state laws.
Include a section in the rental application that states what types of checks you'll perform. It should also ask for details such as the applicant's:
- Full name
- Date of birth
- Social security number
- Past addresses
- Employment details
- Proof of income
- Driver's license or ID
Use a Screening Service
A professional service can handle the bulk of the tenant screening process for you.
Look for one that complies with FCRA and Federal Trade Commission regulations. Make sure they provide comprehensive reports that include:
- Credit history
- Rental history
- Eviction history
- Employment verification
- Criminal records
Confirm and Analyze the Results
A tenant background check service should provide you with a full tenant history report. Store digital records with encryption and strong passwords. Put physical documents locked away in secure areas.
Take landlord-tenant verification steps such as following up with references and checking the tenant's credit score. Analyze whether they affect the renter's safety and financial health.
Make and Communicate Your Decision
Avoid getting on the wrong side of Fair Housing regulations. You can't deny an applicant based on:
- Race
- Color
- National origin
- Religion
- Sex
- Familial status
- Disability
Rejecting them solely for having a criminal record is also considered discriminatory. If the applicant has a criminal record, consider the:
- Type and frequency of their crime(s)
- How recent they were
- Mitigating circumstances
Use other apartment tenant screening methods. Consider the property itself to decide who you should rent it to. Think about the:
- Type
- Condition
- Location
Set expectations for the tenant's DTI or debt-to-income ratio. It tells you how much of their income goes towards paying debts. A ratio of 36% or less is considered healthy.
When you've decided to accept an applicant, notify them by phone or email as soon as possible. Give them everything they need to know to take the next steps such as:
- Signing the lease
- Paying the security deposit
- Scheduling a move-in date
- Acceptable rent payment methods
- Learning the property rules
If you choose to reject an applicant, you need to send them an adverse action notice. It should tell them why they were denied. It should also let them know that they have a right to review and dispute the reported information in their rental background check.
Go Beyond a Tenant Background Check
A tenant background check starts with getting written consent from all applicants. Next, hire a professional screening service. They'll provide the information you need to judge whether applicants are the right fit for your property. Inform them of whether their application has been accepted or denied and why.
Aloe Property Management is a professional property management company in the Chandler, AZ area. Our expert team provides quality service and gives you top dollar for your investment. Contact us to start adding value today.
