Most landlords realize ordering a background check on their prospective tenant is a good idea. It provides you with insight into their financial and legal stability and allows you to check on whether they’ve had any past disputes with landlords or employers or even with the law. However, some landlords will order the background check without any clear idea of what information it will provide, how to understand the information, and what to do with it once they have it.
Credit and finances
Victig has posted an example of what a landlord might see in a tenant’s background check. First, it shows a credit and financial summary which tell you whether the person has any current or previously delinquent bills, what their mortgage and other loan payments are, and whether they have any bills that have gone to collection. There will be total columns which show you how much of their monthly income is tied up in those bills or loan payments.
If you provide the program with the proposed rent amount, you’ll see a ratio comparison of that amount. Most lending agencies say people should not have more than 36% of their income tied up in debt (mortgage, loans, credit cards) at a time. Consider the monthly rent as part of that “debt.”
The credit report also shows information regarding the potential tenant’s current employment, how high their credit is with each of their financial institutions, the balance of those credits, and past due amounts on each loan or bill. Contact information for each creditor can be found in the report, along with other companies who have requested background checks on the individual.
Another part of the background check is a search of the National Criminal and Sex Offender Database. If an applicant’s name is found, you’ll be able to see when and where he or she was indicted, what the charges were, and what the outcome of any trial or court hearing was. The records will indicate how current they are so you should note whether they have been updated recently.
Be aware of potential caveats
It’s important to remember that in the event of credit fraud or identity theft, some charges or credit delinquencies may be inaccurately associated with the person you’re searching for, so you may want to follow up with the applicant about any suspicious activity you saw on their background check. Conversely, just because the person’s name did not appear in the database does not mean they have never been convicted of a crime. Exhaustive searches of every crime database in the nation are not currently available.
Tenant screening should be an important part of any landlord’s process before they choose a resident for their rental. It can provide you with information unobtainable in any other way, and perhaps save you money, stress, and frustration in the long run.