5 Reasons Landlords Must Require Tenant Background Checks
Making yourself aware of a tenant’s prior behavior, especially criminal history, makes you a more informed and empowered landlord. After all, the future is best predicted by observing the past.
Background checks are one of the most important parts of tenant screening, which is the process that helps you answer this main question: Who should you choose to live in your rental property?
Thorough tenant screening includes the following steps:
- Create an online rental listing that engages the highest quality tenants
- Ask prospective tenants the right questions
- Meet the tenants for the first time and watch for red flags
- Require a thorough rental application
- Verify tenant income and employment
- Require prospective tenants authorize a credit report
- Analyze a tenant credit report
- Require prospective tenants authorize a criminal background check
- Analyze a tenant credit background check
Tenant background checks should not be skipped, as they provide many benefits.
Here, we’ll outline the five reasons landlords must require tenant background checks:
Keep Neighbors, Community, and Yourself Safe
When you’re considering who to rent to, you should think of it as who you are allowing in your building and your community. It is your responsibility to your community to choose tenants who don’t put anyone at risk of harm.
According to TransUnion, an online credit report agency, 22% of tenants who authorized a background check during the rental application process had a criminal hit on their record in 2015. That’s a high percentage of tenants who have a criminal history.
Requiring tenants authorize a background check also protects you. As a landlord, you are constantly dealing with your tenant, sometimes about difficult things that could escalate into arguments. You need to be sure that your tenant is responsible and not prone to rely on violence. Otherwise, you could be putting yourself in a risky situation.
Protect Yourself From Liability
By requiring a tenant background check, you are setting yourself up to know as much valuable information as possible. For example, you might learn that your prospective tenant has a history of shoplifting. With this knowledge, you can reject this applicant because you have a reasonable concern that he or she could steal from other tenants in the building.
Let’s say you didn’t require the criminal background check and you accepted the prospective tenant. He or she could possibly steal from neighbors. In that case, you’d have to deal with angry neighbors, who would likely sue you for the damage they incurred from theft. This is a prime example of how a background check can save you legal trouble down the road.
It’s important to note that if you skip a tenant background check, you may be liable if something goes wrong. Ignorance is not an excuse. If a crime happens in your building because your tenant lives there, you can be sued for negligence. You need as much knowledge as possible to make the best decision.
Furthermore, your reason for accepting or denying an applicant is important. According to Fair Housing Laws, you cannot deny an applicant based on discriminatory factors like age, gender, national origin, etc.
You are allowed to deny an applicant based on criminal history, but you have to prove that your decision is meant to preserve the safety of your property and your community. You cannot use criminal history to deny an applicant as a cover up for discriminatory reasons. It has to be clear that you are rejecting him or her because of a presumed, reasonable risk.
We recommend you hold onto the criminal report and document why you rejected an applicant, in case of a fair housing dispute. We recommend using Rentalutions’ tenant background check because that way, the tenant’s personal information is safely stored in the cloud and accessible 24/7.
Discourage Tenants Who are Trying to Hide Something
Simply requiring a tenant background check sends a clear message to your applicants. It discourages people from applying who want to hide something.
There are some red flags that you can notice before you ask your tenant to authorize a background check:
- If an applicant stops replying to you after you make the requirement known
- If an applicant refuses to authorize the background check
You should not follow up with an applicant who stops replying. It’s an indication that he or she is disinterested or trying to hide something.
If an applicant refuses to authorize a background check, you should not waive your requirement. Strong tenant screening processes do not change for anyone. It is also be a violation of Fair Housing Law if you make special exceptions for someone.
Tenants who are trying to hide something are tenants who will likely cause you problems down the road, so it’s best to discourage them by requiring a tenant background check.
Verify Application Claims
In your rental application, you should ask your applicant if he or she has a criminal history. You should specify what you mean by criminal history. For instance, you can tell him or her that you don’t need to know about speeding tickets, but you are interested in arrests, felonies, and convictions.
Applicants should be required to sign rental applications to verify they have told the truth. You can use a background check to verify if an applicant was indeed truthful. If they come clean about a criminal record on their application, that is a good sign. They are owning up to their history. Conversely, if they say they don’t have a criminal history, but a felony comes up on their report, then that is a red flag.
Reduce Tenant Turnover
By requiring a tenant background check, you are conveying to prospective tenants that you have a rigorous tenant screening process. This helps attract high quality tenants who are more likely to stay long-term or renew their lease.
This saves you time and money because you won’t have to look for a new tenant right away. You also save yourself legal trouble and headaches by renting to a high quality tenant.
Now that you understand the benefits of tenant background checks, let’s go over how they work and how accurate they are.
How Do Tenant Background Checks Work?
At Rentalutions, we partner with TransUnion to provide background check information. After a tenant authorizes a background check, TransUnion scans various databases for connections between identity information and a criminal record. Criminal history searches are typically done with identity criteria like name, date of birth, and address.
Criminal courts typically don’t include social security numbers (SSNs) on criminal records anymore because criminal reports are public information and they want to reduce identity theft. For this reason, SSNs are typically not used for the database scan.
However, background checks still require a SSN in order to verify identity by matching an applicant’s name to their SSN.
Adding more criteria (like middle names, etc) also helps enrich the search of public records because it means the inquiry has a wider net.
In order to start a criminal check, you’ll need two things:
- The applicant’s approval of a criminal background check
- The applicant’s name, date of birth, address, and SSN
This information can be easily and securely gathered if you use our tenant background check at Rentalutions. You send a request to your prospective tenant to authorize the credit and background check. Once the tenant has authorized it, they securely input their SSN. You never see the SSN, which reduces your liability and provides a lot of comfort for the tenant.
Our tenant background check is comprehensive. We collect information from all 50 states, include a sex offender check, and verify SSNs. Our all-in-one credit and background check includes information about the tenant’s financial history (their credit score and payment history) along with their background check.
Our report makes tenant screening easy for you to complete and analyze, we even offer education on how to interpret your tenant’s credit report. And tenants love how easy it is to complete: all they have to do is fill in their SSN.
An accurate background check pulls data from reputable sources. With the help of Transunion, our reports instantly pull data from the following sources:
- Felonies and misdemeanors from state and local jurisdictions
- Sex offender public registries from the states and DC
- Federal data including:
- Drug Enforcement Administration
- FBI’s Most Wanted
- Homeland Security
- U.S. Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) Most Wanted
- U.S. Marshals Service Most Wanted
- U.S. Secret Service Most Wanted Fugitives
- U.S. Treasury Office of Foreign Assets Control (OFAC)
That’s data from almost 700 sources of criminal, sex offender, and eviction records with nearly 300 million criminal records, 40 million of which were added in 2015 alone.
Now that you understand how tenant background checks work, and you’ve asked your tenant to authorize one, how do analyze it?
Analyzing Tenant Background Checks
If your applicant has no criminal history, you still need to carefully consider everything you’ll learn from the tenant screening process before making a decision. But it’s one less red flag that you have to worry about. And remember, a clean criminal background check does not signify that someone will be a perfect tenant- you should still watch out for red flags.
If your applicant has a criminal history, you should consider the following 5 factors:
How long ago did the crime occur? A crime that happened decades ago may be less important to you than a crime committed a few months ago.
Violent crimes should be more heavily considered. A minor crime, like underage drinking, may be considered permissible.
Has the applicant committed several crimes? Or just one? Multiple arrests and misdemeanors are a larger red flag than one single incident.
As a landlord, you should be concerned about violent crimes, assault, theft, trespassing, vandalism, shoplifting, arson, possession of an unauthorized weapon, etc. Crimes that may not be as relevant are speeding tickets and underage alcohol consumption.
There are sometimes legal restrictions placed on individuals who have committed crimes. For instance, some sex offenders cannot come close to schools or parks. If your prospective tenant is a registered sex offender, you should find out if they are under court restrictions or probation and consider your property location in relation to nearby schools and parks.
Some landlords have their prospective tenant explain his or her criminal history. According to SmartMove’s poll in 2016 (shown below), 34% of landlords will overlook a relevant criminal history issue if the tenant has an explanation.
Here’s the percentage of landlords who agree or disagree with overlooking relevant criminal history if the tenant has an explanation:
While it can be useful to hear a tenant’s side of the story, it’s important to not be swayed, especially if the tenant has a severely violent history.
Making a decision based off of a criminal background check comes down to the landlord’s discretion and keeping legal requirements in mind.
Rentalutions’ Final Thoughts
Why should you care about tenant background checks?
Tenant background checks are the best predictor of troublesome tenant behavior. Serious issues like violence and legal trouble can be avoided with careful tenant screening.
60% of landlords believe that background checks are more important than credit checks. After all, background checks are a safety measure, while credit reports are a measure of financial responsibility. Both are extremely important: the background check should not be skipped.
A solid screening process, which includes a tenant background check, is a critical part of being a successful landlord. To incur the lowest legal risk possible and have the fewest tenant-related headaches, create a free Rentalutions account now to start screening your tenants today.