If you’re a landlord, screening tenants is probably one of the most important parts of your job. You want to find renters who will take good care of your property, pay rent on time, and avoid problems with the neighbors. But how do you really know if an applicant will be a responsible tenant?

That’s where background checks come in. Running a background check on potential renters gives you inside information to help make smarter leasing decisions. Instead of just taking someone’s word for it, you can verify their criminal history, credit score, eviction record, and other key details. 

Now I know some landlords see background checks as more hassle than they’re worth. But trust me, a little diligence up front saves huge headaches down the road if you end up with nightmare tenants. I’ve been there, done that – and I wish I had run more thorough checks on problem renters in the past.

In this guide, I’ll go over everything landlords need to know about using background checks to screen tenant applicants. You’ll learn:

– The major benefits of tenant screening

– What different types of background checks reveal

– How to stay compliant with fair housing laws 

– Red flags that should disqualify an applicant

– Tips for evaluating check results fairly

– Alternatives if you choose not to run checks

If you want to place your rental in responsible hands, background screening is a must. So read on to become a pro at using background checks to find great tenants!

Why Tenant Background Checks Are So Important

I know some small-time landlords who don’t bother with background checks. They rely on interviews or “gut feelings” to pick tenants. In my experience, that’s a recipe for disaster! Here are the key reasons every landlord should run professional background screenings:

Reduce the Risk of Property Damage

Irresponsible tenants who engage in illegal activity or substance abuse pose a major risk for vandalism, theft, and damage to your rental property. Background checks allow you to uncover any patterns of destructive behavior in an applicant’s past. If they have multiple criminal convictions, that’s a huge red flag. Screening keeps bad apples off your property.

Avoid Problem Tenants

Background checks reveal previous behaviors that signal someone may be a troublesome tenant. Have they left past rentals a mess? Do they have a stack of evictions for lease violations? Is their credit riddled with unpaid bills? Spotting these patterns allows you to reject high-risk applicants who are likely to stop paying rent or cause conflicts.

Protect Other Tenants 

In multi-family properties, your current tenants rely on you to carefully screen applicants. You don’t want to inadvertently place registered sex offenders or people with violent criminal histories in the same building with families and children. Responsible background checks give you the power to prevent dangerous situations.

Comply With Fair Housing Laws

The Fair Housing Act requires landlords to apply the same neutral tenant selection criteria to every applicant regardless of race, gender, religion or familial status. Running background checks on all prospects, and rejecting applicants strictly based on those unbiased criteria, is one way to avoid fair housing discrimination claims.

As you can see, tenant screening through background checks benefits you and your tenants. The more you know up front, the lower the chances of renting to someone who will be a problem.

What Background Checks Reveal About Applicants 

Background checks allow landlords to peek into an applicant’s history to learn how they’ve conducted themselves professionally, financially, and legally. Here are the typical components of a comprehensive tenant screening:

Criminal History

A nationwide criminal history search will uncover any past misdemeanor or felony convictions across state lines. This includes DUIs, drug charges, sex offenses, assaults, and white collar financial crimes. Law-abiding tenants don’t have rap sheets!

Eviction History

Look for any unlawful detainers or formal evictions filed against the applicant in civil court records. A string of evictions suggests chronic problems paying rent or following rental agreements. Tread carefully renting to anyone with multiple evictions.

Credit History 

A credit check provides their payment track record, total debts, length of credit history, new accounts, collections, and public records like bankruptcies and judgements. You can also validate income numbers. Bad credit equals bad news.

Employment Verification

Many landlords require recent pay stubs to confirm stable income. Employment history from credit reports also shows if they change jobs constantly or have gaps in work history. Scattershot employment may mean income instability.

Rental History

Contact previous landlords to learn about their rent payment history, compliance with lease terms, property condition when vacating, disputes with neighbors, unauthorized occupants, and other rental red flags.

Identity Verification

Background screening companies verify social security numbers and aliases through credit reports and public records. This ensures applicants are who they claim to be on rental applications.

Specific Types of Background Checks 

Besides a standard screening package, some landlords also run specialized checks targeting applicant attributes that are dealbreakers.

Criminal Background Checks

A criminal search provides records of misdemeanors and felonies that may automatically disqualify prospects with violent, sexual, or drug-related convictions. Set clear criteria.

Credit Report Checks

Verify credit history, total debts, payment timeliness, bankruptcies, judgements, collections, and income numbers. Set minimum credit score requirements.

Eviction Record Search

Look through court records for any formal evictions or unlawful detainers filed against the applicant by previous landlords. Multiple evictions are alarming.

Employment Verification

Call the applicant’s employer or require recent pay stubs. Verify the stated income and duration at their job. Second-hand income verification beats taken an applicant’s word.

Rental History Checks 

Contact previous landlords to validate their tenure, rent amounts, payment history, lease compliance, property condition, disputes, unauthorized occupants, and renewal eligibility.

Sex Offender Registry Check

Search national registries to identify any registered offenders. Keep them far away from your property for everyone’s protection.

Terrorist Watch List Check

Some landlords screen applicants against the FBI terrorist watch list for added security, although applicant disputes may arise. Use caution here. 

Each background check component provides valuable puzzle pieces creating a complete picture of who you’re renting to. Cast a wide net to avoid missing red flags.

What Background Checks CAN’T Tell Landlords

Landlords should know that fair housing and privacy laws place some limits on background checks. You cannot legally uncover or base rental decisions on:  

Medical/Disability History

An applicant’s physical/mental health, disabilities, or medical treatments must remain confidential under the Americans with Disabilities Act. Don’t access medical records. 

Bank Accounts and Assets

Background checks only report debts. The applicant’s income sources, account balances, assets, and net worth cannot influence your decision. Discriminating based on wealth is illegal.

Social Media Activity 

Don’t use Facebook, Twitter, Instagram etc. to screen tenants. Conducting “social media background checks” can violate privacy statutes. Stick to standard channels.

Age, Gender, Race, Religion

It’s discriminatory to factor protected characteristics into evaluation of background checks or other selection criteria. Focus objectively on screening results.

Tread carefully regarding what influences your tenant selection process. Only consider background check components that directly assess tenant suitability without violating rights. An experienced landlord/tenant attorney can explain permissible considerations in your state and locality. My advice is when in doubt, leave it out.

Obtaining Consent to Conduct Tenant Background Checks

Since background checks involve digging into sensitive personal information, landlords must obtain prior written consent from all applicants age 18+. Include a background check consent clause in your rental applications.  

The consent statement should explain:

– Who will conduct the background screening (e.g. Rental Research Services)

– What checks will be performed (credit, criminal history etc.)

– How the information will be used to assess tenant applications

– That results will remain fully confidential 

Require applicant signature and date as proof of consent. I also recommend including a copy of the background check report you pull in the tenant’s file. Consent forms protect you from claims of invasion of privacy or background check violations.

Adverse Action Notices: Explaining Check-Related Denials

Whenever declining a rental application due to negative findings from background screening, always provide the rejected applicant an “adverse action” notice explaining why you’re denying tenancy based on information from the report.

These notices should include:

– That their application was declined and background screening played a role

– Specific reasons for denial tied to background history (e.g. poor credit) 

– Contact information for the screening company in case of disputes

– Instructions for obtaining a free copy of the background check report 

Providing adverse action notices gives you legal protection under the Fair Credit Reporting Act when using background checks in tenant selection.

Complying With the Fair Credit Reporting Act

Using a professional tenant screening service obligates landlords to follow the Fair Credit Reporting Act. Violations open you up to lawsuits or penalties. Make sure you:

– Have a legally “permissible purpose” for running checks. Landlord-tenant relations qualify.

– Give written notice that you intend to obtain background reports for screening.  

– Only share results with authorized people involved in the leasing decision.

– Allow applicants to dispute any inaccurate or unverifiable information found.

– Provide adverse action notices if rejecting applicants based on screening findings.

Take FCRA compliance seriously. Consult a tenant lawyer if you have concerns about obeying provisions in the name of safety. Having strict criteria backed by documentation offers the best protection. Don’t wing it!  

Interpreting Background Check Findings

The whole point of pulling background checks is using the results to make better tenant decisions. Here are some tips for analyzing key sections:

Reviewing Criminal Records

– Violent crimes, sex offenses, and serious drug charges often warrant automatic rejection. 

– Minor infractions from long ago may be excusable depending on severity and pattern.

– Be prudent with “blanket” criminal history bans that could raise applicant discrimination claims. Assess individually.

Evaluating Credit Histories

– Set minimum credit score requirements based on your risk tolerance (e.g. 600+).

– Look for steady on-time payments. Collections and judgments merit scrutiny.

– Calculate debt-to-income ratios. Too high indicates financial strain.

– Major medical issues can understandably cause credit dips that responsible tenants recover from.

Interpreting Eviction Records

– One or two old evictions may be forgivable with current landlord endorsements. Look for mitigating facts. 

– Multiple or recent evictions signal seriously risky behavior given proper notice.

– Review records for lease violations indicating chronic issues vs. atypical hardship.

Calling Previous Landlords 

– Ask about rent amounts, payment history, lease compliance, property condition, disputes, move-out notice etc.

– Take reviews with a grain of salt. Personality conflicts happen. But patterns across landlords reveal a lot.

Use background findings to enrich your understanding of applicants – not as rigid pass/fail criteria. Avoid checkered pasts but give applicants a chance to contextualize red flags that aren’t dealbreakers.

Red Flags No Landlord Should Ignore

I believe in second chances. But some background check results spell T-R-O-U-B-L-E and landlords should proceed with extreme caution:

Felonies

Applicants convicted of assault, sexual battery, stalking, arson, weapons charges, or financial fraud almost always warrant rejection. Forgiveness depends on your risk appetite.

Registered Sex Offenders 

Absolutely do not house sex offenders in units with children present. Reject applicants listed on national sex offender registries regardless of assurances – it’s not worth endangering residents. 

Financial Red Flags

Multiple bankruptcies, astronomical debt, collections, liens, judgments, and recent evictions should make any prudent landlord jittery. Can they reliably pay monthly rent?

Repeat Eviction History

Frequent unlawful detainers and formal evictions against past applicants, especially recently, signal a seriously risky tenant. Eviction means they failed to pay rent or uphold basic lease terms despite due notice. What will change now? Don’t be their next victim. 

Application Lies

Catching an applicant in outright rental application lies – bad enough to alter your decision – should lead to automatic rejection for dishonesty alone. What else are they hiding?

While every applicant deserves a fair shake, some histories invite inescapable risks landlords must avoid for self-preservation. Don’t pay the price for naive generosity.

Conditionally Approving Borderline Tenants  

For applicants whose background checks aren’t stellar but don’t contain clear dealbreakers, issuing a conditional approval with extra protections can make sense in some cases. Options include:

– Requiring a larger security deposit or extra move-in fees

– Using “surety bonds” securing payment if tenant defaults 

– Setting up automatic rent withdrawals instead of trusting checks  

– Starting with month-to-month leases instead of long-term  

– Inspecting the unit quarterly instead of biannually

– Adding late fees or penalties for lease violations  

If the applicant accepts special terms, the elevated financial exposure may be worth a trial. But remember extra conditions only reduce risks – they don’t eliminate them. Carefully evaluate whether marginally qualified tenants are worth the gamble. Make collected fees worthwhile.

Giving Rejected Applicants an Appeals Process

In the interest of fairness and transparency, establish a policy allowing rejected rental applicants to appeal your decision if they dispute background check findings or have mitigating circumstances. 

In your written tenant screening criteria, outline your appeals process including:

– Who to contact to submit a rental application appeal

– Any supplemental info like pay stubs or landlord references you’ll consider 

– Scenarios where you may override an initial denial after reviewing additional context  

– How long applicants have to submit written appeals after denial  

By allowing appeals, you reduce chances of misunderstanding and show good faith in considering special cases. But don’t bend rules to the point of endangering your investment and other residents. Sometimes “no” means no.

Staying Compliant With Background Check Laws  

While background checks are legal and common tenant screening tools, landlords must avoid misusing reports in ways violating housing laws. Always:

– Have the same documented screening criteria for every applicant. No double standards or waivers.

– Exclude protected class information like race, gender, or disability from decisions.

– Don’t impose absolute bans on renting to ex-offenders. Evaluate individually.  

– Allow applicants a chance to contextually explain credit dings or crimes.

– Provide adverse action notices explaining any check-based rejections.

– Let applicants appeal disputed background check results.

– Have rejected prospects sign forms acknowledging reasons for denial.

Straying outside rigid background screening protocols is asking for fair housing allegations. Consistency and documentation are your friends!

Alternatives If You Don’t Run Background Checks

Most seasoned landlords consider professional tenant background checks essential. But less conventional alternatives include:

Reference Interviews – Calling past landlords, employers, or other personal references provided by the applicant. But these subjective reviews lack important verification you get from credit and eviction searches. Relying solely on endorsed references could blindside you.

Meet-and-Greet Sessions – Some “mom and pop” landlords skip checks and simply interview prospects in person to vibe out their character. But impressions can be deceiving if you lack objective history. It’s just one data point.

Rental Applications – Scouring previous addresses, income claims, employer names, and other information the applicant provided can offer clues about responsibility. But info can be exaggerated or fabricated without verification.

Renter Resumes – Requiring applicants submit a timeline of their rental/job history, references, income proof, and credit self-reports. This provides fodder for assessments but allows whitewashing of red flags omitted by the applicant. 

While alternatives provide useful insights about applicants, they lack the definitive paper trail produced by thorough tenant screening. There’s no substitute for credible background checks when choosing who lives in your property. Don’t tie your own hands as a landlord. But if you insist on skipping checks, at least gather supplemental data points to compensate.

The Bottom Line

At the end of the day, we landlords have an obligation to our properties and current residents to vet applicants diligently before handing over the keys. Background checks remain the tried-and-true standard for pinpointing responsible prospective renters from the risky ones. 

While rarely perfect, tenant screening provides objective insights that improve your odds of placing your property in good hands. Prevention is the best medicine when it comes to problem tenants. Nip issues in the bud by investing in detailed background checks prior to move-in.

This guide provided a blueprint covering background check essentials for landlords. Now that you know exactly what tenant screening can reveal – and how to stay compliant using reports – there’s no reason to lease properties on blind faith ever again. Use background insights to keep your rental income, property value, and residents safe.