How to Do Criminal Background Checks (The RIGHT Way)

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My first two posts on tenant screening dealt with the most important aspects of tenant screening, credit and income verification.

In my third post on tenant screening, I discussed, with quite a bit of controversy, the downfalls of past landlord checks. The fourth and final pillar in tenant screening is the Criminal Background Check.

Why is a Criminal Check Important As An Investor?

Related: The New Landlord Checklist

I see about 400 tenant background checks per year.

They are not all my tenants, as I screen tenants for a 120 unit homeowner association (HOA).  I decide, based on the HOA rules in place, whether or not people will live in the complex.

The policies I created, with the help of the other owners, have led to an environment where we went from the highest crime rate multifamily complexes in our city, to one of the lower ones.

Not only are the calls to the police down 90% (140 in 2003 compared to 14 in 2014), but the severity of the calls are way down too.  This takes into account all of the first quarter calls, including medical emergencies.  I much rather see a noise complaint or medical call, than an assault or robbery.

Why do you care about a criminal record?

Because if a person has a criminal background, do you think they care about an eviction on their record?  I want people to be deathly afraid of an eviction.  I want them to be someone that follows rules, as I have rules in my lease.

I am all in favor of giving people another chance, but my tenants that share a common wall might not want me to.  They know that when they are on vacation, the other tenants in the building also know it.

A multifamily landlord has to think of the impact of the other tenants, not just this one.  In a single family home, all of the other neighbors could move out, and it doesn’t impact you, as long as you get your tenant’s rent.

Criminals are not necessarily bad people, they just got caught.  Martha Stewart is a multiple felon.  Bernie Madoff is.  Many professional athletes and actors and actresses have criminal backgrounds.  Some landlords are felons themselves, they just have not gotten caught.

If you had a younger girlfriend when you were 18, you might be a sex offender.  If you completed a RE transaction where some things were not disclosed, you could be a criminal.  If you ‘missed’ a bit of revenue on your taxes, you might be a criminal.  If you ever borrowed a car, without permission, you could be a criminal.

But this post is not about whether or not something should be legal, or follow a person forever.  It is about finding criminal activity, and making a decision for your business.

Related: The Ultimate Guide to Tenant Screening

Common Mistakes When Running A Background Check

Most landlords do not have the slightest clue how to do a criminal background check.

Many property managers are at a loss too, unless they use a screening service.  Many Landlords want to ‘give people a chance’, and they get burned.  I have seen a property manager run a Minnesota criminal check on tenants that were moving in from Nebraska.  The tenants had never stepped foot in MN, of course they were clean.

One of the first mistakes that landlords do is run a “National Criminal Background Check”.  After all, how much better can a check be?  It checks all 50 states, plus Washington DC, and you find out all of the dirt on your tenant.

If your tenant is squeaky clean, this is an OK method to run a criminal check, but you have just wasted a bit of money.  The fact is, the national criminal check system is only as accurate as the data it receives.

Some states are two years behind in sending information.  Some states do not provide misdemeanor violations.  Some states put a violation ‘on ice’ for a while, and then dismiss it if there are no further violations.  All of these are important things to know.

The plus side of a National check is that you might find information in a state the applicant never lived in.  Perhaps they were traveling on a drug run, and got stopped along the way for something.

Maybe they did something during an out-of-state protest and got arrested.  Maybe they were at an after-hours party on Spring break and things got out of hand.  Odds are, these might be in the national database, but it might take a year or so before it gets in there.

How To Start a Criminal Background Check

When I get an application, I know that the tenant should at least have said they are not criminals, and do not have a criminal record.

Most often, the tenants are telling the truth.  When you do not have a criminal record, and very few people do, it’s easy to be honest.

Often one of the first things I will do, before I spend $40 on a background check, is Google the person’s name.  Combine the search with the word ‘Arrest’, or ‘mug shot’.

If they are bad individuals, ‘stuff’ will show up.  I might Google the person’s phone number, or look at images in any of the searches.

Do they hang out with questionable characters?

Do they post videos of themselves revving up their motorcycles in front of their rental?

I am just looking for outrageous items that could be a detriment to my rental.  Maybe a “Screw the Landlord” party is posted on Craig’s list, with the tenant’s phone number and previous address.  Maybe they are selling puppies, or snakes, and they don’t have a pet listed on the application.

If you are more creative with your searches, you can find your tenants hobbies, and extra-curricular activities.  You are looking to find ways to connect the limited information that you already know about your tenant, with what you can find.

If they say they write church bulletins, and you find a church bulletin they wrote on-line, it established a bit of truthfulness about your tenant.

I only spend 15 minutes doing this at the most on my tenants, but it is interesting what you find out at times.  Once you have uncovered any of the easy to find items, you can run a state criminal check.

Most states have a Bureau of Criminal Apprehension, and that provides information about arrests and convictions.  It is an OK source for major criminal events, and that is where most criminal background checks stop.

Courts Sites Searches Are Invaluable

If you live in a state like Minnesota, we have a Court site that you can search to find all of the smaller items that anyone has paid a fine, or been to Court for.

Speeding tickets, DWI, Murder, anything that has been through the court system, will be there.  It has both civil and criminal items.  It is a wealth of information.

In MN, going to an actual courthouse to look on their public terminals, will lead to even better information.  You will get street address information, open cases, dismissed cases, non-public cases, and much more detail and court documents for each case.

I know most other states have a public Court site, just Google your state and “Search Court cases”.  If you find the site, practice.  Search for yourself, your friends, your associates, your contractors, your parents, boyfriend, girlfriend, etc.  Get some practice, you will need it. You might find information that will save you a lot of frustration too.

If your handyman was convicted of burglary, do you want him in your tenant’s apartment doing maintenance?

If your boyfriend has been convicted of domestic assault several times, isn’t that something you should know?

Once you have made sure it will be worth the money to submit an application to a background check company, do it.  Do not wait; it could cost you a month’s rent.  If it takes a week to complete the check, and you then decline the tenant, you are a week behind.

You will want the background check company to run a County level criminal check on all counties that the applicant has lived in for the past seven years, as evidenced on the credit report.

Some states only hold information for seven years, so going back further might not be cost effective.  Bad people cannot stay good for long, so odds are, if the person is not great, they will continue to have had issues.

If I am pretty certain the tenant will pass the check, I submit the application to the background check company right away.  I can do my own search later, if I want.  I want a credit score first.

If I see a nice car, they say they have a good job and can speak intelligently about it, and write a check for the $1,000 holding fee without a problem; these are indicators that you probably have a great tenant.  But still verify.

Common Themes

I see many background checks, and here are some unscientific generalities.

  • When a tenant has a low credit score, ~619 and lower, they will generally have more criminal issues than a tenant with a ~675+ credit score.
  • People with a 700+ credit score rarely have any criminal issues.
  • People in professional careers rarely have criminal issues.
  • When a tenant has a DWI, they will have several other drivers’ license violations, such as no insurance, driving after revocation or suspension, other DWIs, etc.
  • Men have more criminal events than women, regardless of the credit score.
  • People without a credit score, and some collection accounts, generally have a several criminal events in their history.
  • People with multiple DWIs, will probably be a problem tenant at some point.
  • People with lower incomes, generally have more criminal events.
  • People with evictions, generally have more criminal events.

Once you know the person’s background, it is time to make a decision.  You should have objective criteria that you can screen everyone with.  I like the idea of no more than one or two misdemeanors in the last five years, and nothing recent.  Assuming a solid credit score, I like the entire background to be clean.

Remember, most convictions go away when a person turns 18, so people under 23 will not have five years of history.

Look for my next post, the “Downfalls of Hiring a Property Manager”.

What do you do to find criminal history on prospective tenants? 

What is the worst thing you have found?  Have you ever found something that a tenant tried to hide?

Be sure to leave your comments below!

 

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About Author

Eric is a 54 year old, soon to be former, computer professional. He started several years ago to replace his “work income”, with other alternate streams. He is well on his way to retirement at age 56, and is currently making more money at extracurricular activities, than he is working at his full time job. Whether that is Financially Independent, or just old fashioned entrepreneurial spirit, is in the eyes of the beholder.

27 Comments

  1. Good stuff here. Thanks for theost. The same applies to contractors I havefound out.did a google search on a contractor and found he had run a credit card scam while in college. In speaking to him you would have never thought this. Dod a little more digging and he had a judgenent against him 2 years prior.

    • Thanks for the comment! There is a ton of information out there in today’s social network environment. Google picks up most everything. For better or worse, the information is there. I have found many things about tenants to confirm their application ‘story’.

      That’s another reason why you always want to make sure you do not stray too far from a strait and narrow life style…

  2. Really good article, Eric.

    From your article:

    “If your handyman was convicted of burglary, do you want him in your tenant’s apartment doing maintenance?”

    It is very important to let your tenants know that you screen the people who do work for you. There are A LOT of handymen, who are in that line of work, because they have criminal records and cannot get hired at a company due to their sketchy backgrounds. Thus, they work for themselves. This does not mean that they have changed their ways.

    Bottomline: check court records on everyone!!! I check the court records on other RE investors and other landlords, just to see how much time they spend in small claims court and to see if they have been arrested lately etc.. I even tell my tenants to feel free to check me out in the circuit court system, to see what kind of landlord I am.

    • Thank you for the comment!

      It’s important to know who your are dealing with. I have found enough ‘stuff’ on prospective tenants that saved me any further checking. Why spend $40, when you already know the result.

  3. Eric:
    Very interesting article.

    In Canada, despite having a thorough national criminal record database, a criminal record check is typically not performed for a tenancy application – in fact, there is no corresponding “Reason for Request” category on the application form submitted to the RCMP.

    Furthermore, having provided {for myself} and requested {for others} criminal record checks for volunteer screening, the results you will typically be provided are a simple gated response: Yes, there is a record, or No, there is not a record. Details on the the nature and extent of any record are not disclosed by authorities due to privacy law.

    • Thank you for the comment!

      We have a lot of privacy things here too, but criminal Court records are public, if you are charged as an adult. I have even seen speeding tickets over 20 years old that are still available. So, once you are in the system here, you are always in the system.

  4. Mohammad Asaduddin(Asad) on

    I learnt a lot from this post and I will try to implement. I own single family homes and can afford to be more lenient without affecting other tenants. One concern I have is if my tenant has good credit and income, they will buy and move. Please comment. Thanks.

    • Eric,
      Mohammad brings up a good point. My tenants with the highest credit scores stay for less than 5 years, because they buy and move, or get a better paying job and move to be closer to it (sometimes out-of-state).

      In my tenant interview (30 minutes minimum) I try to uncover their motivation for renting and ask them how long they plan to rent from me. It is a question on my application. If they write down at least 5 years, I put them to the top of the list. Often tenants have told me that they are working on repairing their credit due to unpaid medical bills, a bankruptcy etc. If they have a history of always paying their rent on time, I choose them over others who have higher credit scores. I have never gone wrong doing this and these tenants generally stay 5+ years, while they rebuild their credit. So, having a very high credit score (in my business) is not such a good thing. Income, a clean criminal background check and the tenant’s history of always paying their rent on time are more important to me.

      • A few questions…

        Why does having a clean criminal record even matter as long as they pay rent and stay a long time? How do you know they pay rent on time, if they have a low credit score? What is your eviction cost, and rate?

        • Eric,
          I think that your first question is rhetorical, right? Behavior often repeats itself, good and bad. I do not want people with criminal backgrounds around my other tenants and their children. For example, they may be a drug dealer or something else nefarious and pay rent like clockwork and want to stay a long time. I don’t want them. My other good tenants with clean backgrounds will move as a result.

          A tenant’s history of paying rent on time can be verified. I had a tenant who had a credit score of about 575, due to a divorce and medical bills. She was single and self-employed (which I determine to be a much higher risk). She paid her rent on time every month and stayed for almost 5 years (left because she got married again). Most of the information on tenants, I gather in the prospective tenant interview. I know how to spot liars and I am a good judge of character.

          My eviction costs = $0.00 As I stated in a previous post, I have not had to ask anyone to leave since 2007 and I have managed my own rental units for 15+ years. I do not rent to people who have been evicted and I have never had to evict anyone.

          I believe that Evictions = Landlord incompetence.

          My RE investment strategy has been to ‘buy and hold’ and over the years, I have increased my cash flow, not by running slums with high rent, but by thoroughly screening my tenants, communicating with them throughout their tenancy on a regular basis and promptly attending to any matters that arise, all on my own, without a PM. The result is tenants respect my property, stay an average of 5 years and when they do leave my turnover costs are minimal. That’s the way I like it. It is not luck but rather by design.

        • That was a rhetorical question.

          You are correct, behavior repeats itself. I generally avoid low credit scores, because of the risk. I have seen as low as a 390 credit score, and I know the landlord that took the family. They moved out after ~14 months, and left a mess. Then they took the landlord to court for getting rid of their junk and not saving it. When the landlord said it was still available to the Judge, they never showed up to get it.

          You can never tell what a renter says about how long they will live in the unit will be true. I have had many say they will live there a long time. If you accept a tenant that no one else wants, they will have limited choices and have to stay longer.

          You cannot go by the tenant’s statement, or the previous landlord’s statements, as I have already written about. If you do, at some point you will get burned. The credit report will have past addresses, and that might be a good indicator of how long they live at places and potentially your new place.

          I do know, that somewhere around the 575 credit score mark, and the tenant becomes very risky. I know that 650 is the average renter credit score. I know in MN, the average credit score is 720, across all people. I have had tenants that were former homeowners have a 585, and all accounts paid, but the debt to income ratio was bad. They were great. I have had tenants in the 600 to 5625 range that I was happy to get rid of. People that are temporary down in life will get back up. People that have never been up in life will likely be a problem at some point.

          The problem becomes how to come up with fair criteria that you can write up, and have everyone that uses it come up with the same result. You want to be consistent, and be able to make the same decision for any applicant that looks the same on paper. I have 24 units, so I need a consistent process, not a drawn out process that could lead to a discrimination suit. Therefore, I use credit score as a major fact in my decisions.

    • Thank you for the comment!

      It is true, people that are moving up in life, will want to buy a home and continue their move up in life. That is the American dream. Those are the tenants that I want to rent to. Low maintenance, high profit tenants. Those are the tenants that the big-box places want, because they are the most profitable.

      My renters in my apartments stay 2-3 years, at most. That is one reason why I recently got my RE license, and am working under a ‘skinny’, 100% commission, broker. I did this so that I can sell them a home on their way out. I have a class B apartments, I want class A or B tenants. Target your market to make the most money. I have a post on my blog about this and spell it out in detail.

      If you have a class C or D rental, the approach needs to be different. By definition, you will likely have marginal tenants; your turnover cost appears to be low at first, because you do not have any. But when they do eventually move out, it will be a much larger expense if you have a class ‘B’ or better rental. Evictions are common.

      If I had a single family home in a marginal neighborhood, I would target my properties to the highest level sex offenders that I could find, and rent rooms. They do not move, they are low maintenance, they are loners and stick to themselves.

      So, it really depends on the type of rental you have. If you have a low-cost, low income approach, like a slumlord, you can make a ton of money. Do minimal repairs, only what the law requires. Paint the floors instead of carpet. Fix doors that are kicked in, or punched out, do not replace. Remove all of the closet doors permanently. Move tenants in, start evicting on the second of the month, get a new tenant in before the first. That is a valid strategy too.

      I figure in Minnesota, an eviction costs me about $5,000. That is $320 for Court costs, $100 to serve it, $160 for the court required attorney (if only one court visit), $55 for the writ, and $125 to serve the writ ($760 total). Then you have two to three months of being vacant. Plus any damages. So, I rather just go the safe route and get good tenants.

      To Summarize:
      You can get a good tenant in a good rental, and make money.
      You can get a marginal tenant in a marginal rental, and make money.
      It is difficult to get a good tenant in a marginal rental, and make money.
      It is near impossible to get a marginal tenant in a good rental, and make money.

    • As a realtor/landlord, I offer flexible lease termination if the tenant uses me as their buyers agent as they buy and move out.
      It’s a great source of clients.

      • Exactly. I have 24 renters, virtually all could buy a home if they wanted, and eventually will. that should gives me 4-5 buyers every year. Not a lot of money, but an extra bonus on top of the rental income.

  5. Not all tenents with Low Credit Scores are bad. I had a Credit Score at 545 (now 580) and lived in this same Apartment Complex 13 years. We had seen Managers come and go and now we have a new Management Company/Owner. I basically got the new Manager her job, simple reasoning, her boss violated a lot of Tenent Rights which I got her fired and the new manager who was the Lease Manager (Assistant Manger) Promoted :) she is good person and deserved it. The Manager here though found out I was and am a Real Estate Investor now. They (Management) don’t want us to move out, so instead they are moving us into another Apartment, first floor and better condition to make us happy, Note: We have been trying to move into a first floor apartment for years and was told no way that was going to happen, now next month Management is having us move to a first floor apartment, easier on my poor old back lol….They’re going to gut out the apartment we are living in. Stained carpets, walls are seriously in need of paint and repair (damage is not created by us but by time, wall by the front window is seriously deteriorating and needs to be replaced totally, wood underneath is rotten). And no matter how much we clean, kids mess it up more lol. The good thing is the newer apartment has been totally rehabbed and no carpet, hard wood floors which is easier to keep clean then carpet lol. But I degress, not all bad or poor credit report tenents are bad sometimes things happen to make their Credit Report bad like mine for instance. At least I don’t have a Criminal Record lol…….Which is a good thing, can’t get a good job if you have a Criminal Record and yes I am also working a full time job as well as doing Real Estate Investments lol….

    • Thank you for the comment!

      You are correct, not all tenants with low credit scores are bad. But all tenants with low credit scores are higher-risk. Lower score tenants are likely to cause more damage, and are more likely to cause an insurance claim. They are more likely to cause more work for me, and higher expenses, so therefore, I avoid them.

      Getting a decent credit score involves thinking ahead of how your financial picture is affected by your individual choices. And your financial choices can ultimately affect my financial choices, through less profit for me.

      It is not hard to get a decent credit score, but paying your bills that are due is key. Having an emergency fund is also a start. If you do not pay your bills, or have an emergency fund, I suspect my rent might be non-existent at some point too.

      So, although I am happy for you in your current place, I would not have a vacancy for you.

  6. Had a tenant look so good on his application and screening (this was before our modern internet experience) I wondered why he want to live in this particular house and neighborhood. He could have easily qualified to buy a home. He was a union carpenter, owned a newer truck and was very presentable. My secretary on a whim called someone she knew in the same local of the carpenters union. They confirmed all info on the application, but at the very end of the conversation wondered why he would move from his very nice home that he just finished renovating. The applicant was actually his near twin brother who while living in his basement after being recently released from prison had borrowed all of his I.D. including SSI card and financials! He was getting out of prison for assault and arson, just what I need in a newly renovated house.

    • One can never know for sure, especially in the case of identity theft. It does take a lot to make sure the name matches a driver’s license, social security card, and past addresses on the application match the credit report.

  7. With the internet, it’s is much easier to spot these creeps. I had one a few months back claiming he owned a small computer business. His info checked out, but I he looked a bit rough around the edges.
    I checked on LInked-in and found a picture of this company’s owner, and it was not my prospective tenant. When I mentioned he looked quite a bit different, he claimed the Linked-In picture was from before his accident. “Yes and I see you grew your hair back and lost 100 pounds too.”

    • Good thing you did some checking. I have seen far too many landlords get duped, either because they were naïve, or too cheep to do some preliminary checks. And Google is free!

  8. Great post, Eric! I have not run a criminal background check before but I definitely will going forward, especially if tenants are not people I have known for a long period of time (the past two have been). This is also a good point -> “People in professional careers rarely have criminal issues.” I’m really liking the idea of a rental condo or townhome, especially nicer ones, because I feel like they will attract professionals. Professionals are typically too busy to get into trouble and have too much to lose if they do get in trouble.

    • Thanks for the comment Dave! I like to rent to professionals too. Most professionals are also screened by their company, and would lose their occupation with a bad criminal record. They generally have higher income, and pay their bills. And they have some sense of personal responsibility too.

  9. This post brings up valid points, though I’ve seen many small time landlords fail to ensure such policies are standardized, setting themselves up for expensive discrimination cases that could be avoided by simply having formal, written acceptance standards versus the all-too-common “I think I’m a good judge of character.”

    One observation in regards to credit scores: they’re increasingly ineffective as a solitary measurement. Use of credit is highly cultural. Areas with a higher percentage of immigration populations often have applicants who have little-no credit. Not due to lack of credit worthiness, but simply cultural values that prefer the use of cash over credit.

    You’ve got to have a variety of formalized factors and standards you use for every single tenant that applies. The cost of a bad tenant is very high, but so is the cost of defending the classic “I’m a good judge of character” argument in court. Not worth it. Formalize. Standardize. Screen.

    • Thank you for the comment.

      Credit scores are non-discriminatory. They are not based on any protected class. People can choose, or not choose, to have a credit score. I use them a lot.

      You are correct, if I ever run out of renters with a credit score, I may have do something else. I use credit score and income as my main criteria. Higher deposits might work as well, but I prefer people that have figured out how to do business and work with them.

  10. When screening my own tenants every adult has to do the mysmartmove.com application. I tell them it is very, very thorough, and ask if there is anything that is going to show up there that they want to let me know about.
    Before I return a call or e-mail I look up the person’s name in the local court records. I even look up last name/first name separately in case of name changes (small rural area, so this is feasible).
    Too many “doesn’t play well with others” or “don’t get it” types of offenses are a no go for me; I figure that recent convictions for DUIs, loose dogs, or firearms in public mean this person hasn’t figured out how to function well in normal society, & their chances of being able to hold down a job, manage their money & reliably pay me rent are pretty slim.

    • The problem with mysmartmove, is they do not do a full county level criminal check. They only do a national check, which is not worth .02.

      You are not getting a full level criminal check, so you better rely on other indicators more heavily, or find a place to do a county level check.

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