Any thorough tenant screening process should include credit checks and criminal background checks. While it’s easy to run these reports and move on, you’ll do a better job of screening and placing tenants if you dig into the results and measure them against your application and your rental criteria.
Today, we’re sharing some tips on how to properly investigate an applicant’s criminal background and credit report.
Check All National Databases for Criminal History
When you’re conducting a criminal background check, make sure you can access national databases. You’ll want to check for any criminal history in all 50 states. Look for your prospective tenant’s name on the sexual predator lists and the terrorist watch list. Your application should have a space for individuals to explain any criminal history that you’ll discover. Make sure your rental criteria is clear about whether you’ll accept tenants with criminal histories. You cannot say yes to one tenant but no to another tenant when they’ve been convicted of the same thing. Be consistent and put these standards in writing.
How to Evaluate a Credit Report
Many landlords and property managers will have a base credit score in mind, and those tenants with a credit score that’s on target or higher will get approved while those below the base score will get denied. It’s okay to have a credit score that you want to use as a baseline, but remember that the entire credit report is more important than just the score. People can have tens of thousands of dollars in medical or student loan debt that they’re struggling to repay. That could drag down a credit score but it doesn’t mean they’d be bad tenants.
Instead of focusing on the score, take a look at the big picture. Use the credit report to get an idea of how the tenant handles money. If you see that there are outstanding debts owed to former landlords, apartment buildings, or property management companies, you might want to require that those are paid off before you approve an application. Anyone who has unpaid housing bills from the past is likely to accrue additional unpaid housing bills in the future.
Consider Fair Housing Laws
Following all fair housing laws is critical when you’re screening tenants, and mistakes are most often made when it comes to screening criminal histories and credit reports. This is why we recommend you have a written set of standards against which you measure every application. Your credit requirements have to be the same for all applicants. You need to be aware of things like disparate impact, which important when you’re looking at criminal background checks. Disparate impact is unintentional discrimination in which the impact discriminates even if the action does not. It’s still a new area of fair housing law, and you should ask for help if you’re unsure of how to apply it.
We work with landlords to screen and place tenants all the time. If you need with criminal and credit checks in your Austin tenant screening process, please contact us at AustinVestors. We’d be happy to help you.