What is a rental background check and why do you need it?

A rental background check is not a credit check, though it’s typically done alongside one. And a full background check goes beyond credit history to check an applicant’s employment history, criminal history, rental history, and more. 

You’ll need the rental applicants’ consent and personal information, including their social security number, to run a rental background check, which grants you access to a full tenant screening report. If the applicant doesn’t have a US social security number or won’t provide it, it’s still possible to run a rental background check, though it may be harder for the screening service to find the applicant, especially if they have a common name.

A rental background check provides a lot of information on your potential renter, all of which will help you determine the best person to rent  your property. You can expect to get these details from a full rental background check:

• Personal details: These include full name, date of birth, and social security number. The background check will verify the applicant’s identity using these basic details.

• Address: The background check the applicant’s contact information, including their current address. You’ll see where an applicant has lived, as well as any eviction history, and contact information for former landlords and/or property managers.

• Income: Income verification can be done through the background check, showing whether they have a steady income that’s three times the monthly rent (the standard ratio most landlords use to screen prospective tenants).

• Credit score: You’ll see an applicant’s credit score, as well as patterns in their credit history.

• Employment history: In addition to verifying the applicant’s current income, you can view their employment history, including whether they’ve bounced around in the past.

• Tradelines: These are accounts on a background check or credit report. The most common ones for prospective rental tenants are revolving accounts (like a credit card) or installment accounts (anything with a fixed payment plan, like student loans).

• Collections: A full background check shows whether an applicant has ever been reported to a collections agency due to a tradeline that wasn’t paid. This may indicate a pattern of late payments, as outstanding payments aren’t reported to collections until multiple attempts have been made to collect payment. 

• Consumer statements: The applicant may include a statement with their background report to explain a situation in which their credit was poorly affected.

• Inquiries: These are previous requests for a credit check from other businesses. For example, if the applicant applied for a loan, the bank would check their credit, which shows up as a credit inquiry.

• Public records: Here, you’ll see any info on public records such as bankruptcies, civil judgments, or tax liens.

• Eviction records: If the applicant was ever evicted, the background check will tell you when and where the eviction occurred as well as the case number.

• Criminal records: This shows  any past criminal records the applicant has, including the nature of the charge or conviction. A criminal record is reportable up to seven years while a criminal conviction stays on a record indefinitely.

• AKAs: If the applicant uses other names it will show up as an “also known as.”

As a property owner and soon-to-be landlord, there are several good reasons to do this: 

1. To gauge tenant interest

An uninterested applicant is unlikely to pay the fee for a background check or provide the info you need for the screening process, especially if they have low credit scores, a long eviction history, or an extensive criminal report. Signaling to prospective tenants that you take what goes into a tenant background search like tenant credit checks and criminal background checks seriously also incentivizes people to be honest from the get-go.

2. To protect yourself 

By screening tenants as part of their rental application, you can make an informed decision about the best tenant for your property. You can also consider the safety of other tenants in a multifamily property.

3. For peace of mind

You’ll rest easier knowing you’ve done your due diligence with a full background check. .

If you don’t do a rental background check, you could end up with property damage, an eviction, and/or a tenant with strained finances, which in turn affects you. Performing a rental background check doesn’t mean these situations won’t occur, but it will help you make an informed decision about who you allow into your rental.

There are other ways to gather the information a rental background check provides. You can ask an applicant for landlord references and contact their previous landlords, or speak with the applicant directly. You can also combine a background check with your research. 

If you run tenant background checks, keep in mind that local laws about whether you need to explain a refusal to rent may vary.  

Bungalow offers tenant placement and property management services that keep your property fully occupied and well managed—helping you earn more rental income from your investment property. With Bungalow, homeowners earn up to 20% more rental income. Learn more about Bungalow.