How to Do a Background Check on a Tenant

Most landlords think of a background check as a single action: you run the applicant and a number comes back. In practice it is a five-step process, and four of the five steps happen outside the report. Getting those four right is what keeps the process fair, consistent and defensible. It is also what makes the report actually useful, because a report without written criteria is just data you will interpret differently for different people.

What a tenant background check actually is

When you order a tenant screening report you are usually buying some combination of a credit report or score, an eviction record search, a criminal record search, an identity verification, and sometimes income or employment verification. Each of those is a separate data source with separate accuracy problems.

Two things follow. First, if you obtain any of this through a company that compiles it for you, that company is a consumer reporting agency and you are using a consumer report, which brings the FCRA into play. Second, none of these sources is authoritative on its own. Eviction records in particular are frequently incomplete, mismatched to the wrong person with a similar name, or include filings that were dismissed. Treat every hit as a question to ask, not a verdict.

Step 1 is to write the criteria down first

Before you look at a single applicant, write your rental criteria down and publish them with the listing. Something like: income of at least a stated multiple of rent, no unpaid judgment from a previous landlord, verifiable identity, and a stated policy on how you treat past eviction filings.

Writing them first does three things. It stops you from moving the goalposts once you have met people and formed impressions. It gives applicants the chance to self-select out, which saves everyone time and money. And it gives you a defensible answer if anyone ever asks why one applicant was accepted and another was not. Some jurisdictions require published criteria; even where they do not, publishing them is the single highest-value thing you can do.

Step 2 is to get written consent

You need the applicant's written authorisation before you obtain a consumer report about them. The disclosure that you will obtain a report should be clear and stand on its own rather than being buried in the middle of the application form.

Ask for exactly the identifying information the screening company needs and no more. Collecting a social security number when the provider does not require one increases your data-handling risk for no benefit, and if you do collect it you are responsible for storing and disposing of it securely.

Step 3 is to use a consumer reporting agency

Use an established tenant screening provider rather than assembling this yourself from court websites and search engines. There are three reasons, and none of them are about convenience.

A reputable agency is subject to accuracy obligations under the FCRA, which gives the applicant a route to dispute and correct a wrong record. It gives you a documented, repeatable process that looks the same for every applicant. And it keeps you away from the trap of informal searching, where you look up one applicant's name online, find something irrelevant, and act on it without realizing you have introduced an inconsistency into your process.

Expect to pay somewhere between $20 and $60 per applicant. Application fees are capped or prohibited in a number of states, and in some places you must return the fee if you do not run the report, so check your local rule before charging one.

Step 4 is to read the report against your criteria

Open the criteria you wrote in step one, and check the report against them. Nothing else. If the criteria say income of three times the rent, verify income. If they say no unpaid landlord judgments, look for those. If something appears in the report that is not in your criteria, it is not part of the decision.

Where a record looks concerning, ask the applicant about it before deciding. A dismissed eviction filing from a building-wide dispute, a medical collection, or a name mismatch are all common and all resolvable in one conversation. Several jurisdictions now require an individualised assessment of criminal records rather than a blanket policy, and HUD guidance has long warned that blanket criminal record bans can have a discriminatory effect even where no discrimination is intended. Check what applies where your property is.

Write down the reason for the decision, referencing the criterion. One line per applicant. You will not remember in six months, and it is the record that shows you applied the same rule to everyone.

Step 5 is adverse action if you decline

If you decline an applicant, charge a higher deposit, or require a co-signer because of something in a consumer report, the FCRA requires you to give an adverse action notice. It must tell the applicant that the decision was based in whole or in part on a consumer report, give the name, address and phone number of the agency that supplied it, state that the agency did not make the decision and cannot explain it, and inform the applicant of their right to a free copy of the report and to dispute its accuracy.

This is not optional and it is not a formality. It is also good practice: it is how a wrong record gets found and corrected, which is in your interest as much as the applicant's.

What you must not do

• Apply different criteria to different applicants, formally or informally.
• Make a decision based on a protected characteristic: race, color, religion, sex, familial status, national origin or disability, plus whatever your state and city add, which in many places includes source of income, age, marital status, sexual orientation and gender identity.
• Refuse an applicant because they receive a housing subsidy, in the many jurisdictions where source of income is protected.
• Treat an assistance animal as a pet for screening purposes. See the pet policy guide.
• Run a report without written consent.
• Decline on the basis of a report and skip the adverse action notice.
• Keep applicant data indefinitely. Decide a retention period and dispose of records securely.

Where RentPlace fits

RentPlace sits before all of this. It collects each applicant's own answers to the questions you set, in the same structured form for everyone who inquires on a listing: move-in date, income band, occupants, pets, lease length. That gives you a consistent first filter and a record of what you asked, which is exactly the consistency the rest of the process depends on.

RentPlace is not a consumer reporting agency and does not run background checks, credit checks or criminal record searches. When you get to step three, use a licensed screening provider. What we do is make sure step one and step two are the same for every applicant, which is the part most small landlords skip. See how the screening questionnaire works, or read how to screen tenants consistently for the process around it.