6 Things Every Landlord Should Do With Tenant Background & Credit Checks

by | BiggerPockets.com

After you have the results from your background and credit check, you need to decide what exactly to do with that information.

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6 Things You Should Do With Tenant Background & Credit Checks

1. Confirm they are who they say.

If they are listed as deceased or the Social Security number pulls up another individual’s name, you can probably say bye-bye.

2. Confirm the addresses on their background check coincide with the ones they listed on their application.

If there are any discrepancies, you will want to make a note of that and ask the applicant about the addresses in question. Most likely the response will be something like, “Oh, I forgot.” It is especially important to talk to the landlords the applicant tried to hide from you.

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Related: Should Landlords Run Background Checks on Prospective Tenants?

3. Look for any criminal convictions.

If there are any, you will need to decide if that criminal conviction makes the tenant a less likely candidate.

4. Look for any evictions.

5. Look for any judgments or liens.

If the tenant has a judgment on their background check and you will be denying them because of it, one way to respond to the applicant is by putting the ball in their court. “Hey John, your background check revealed a judgment owed to Property USA, LLC in the amount of $4,200. What can you tell me about that?” Likely, they’ll give you an excuse of some kind, but don’t buy into it. Instead, ask them to have the company in question get in touch with you, but you will need to put their application on hold until you hear from them. Don’t worry, you never will.

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Related: Are You OVER-Screening Tenants? How Background Checks & Credit Scores Can Fail

6. Finally, make sure they meet your credit requirement.

If the applicant meets your minimum standards for qualification in their background and credit check, you can move forward with the next step of processing the application by getting rental references.

[This article is an excerpt from Brandon Turner’s The Book on Managing Rental Properties.]

Landlords: Do you verify anything else when it comes to tenant background and credit checks?

Leave your comments below!

About Author

Brandon Turner

Brandon Turner (G+ | Twitter) spends a lot of time on BiggerPockets.com. Like... seriously... a lot. Oh, and he is also an active real estate investor, entrepreneur, traveler, third-person speaker, husband, and author of "The Book on Investing in Real Estate with No (and Low) Money Down", and "The Book on Rental Property Investing" which you should probably read if you want to do more deals.

9 Comments

  1. Tim Sabo

    Good refresher Brandon. My comment is not really about your article, although I did read it and enjoy it.

    I know of no other way to contact you. Along with your post is an ad from Groundfloor.us about fix and flip loans. The ad gave intriguing info: Rates as low as 5%, from 25K to 2,000,000. So I checked the link, and found that Groundfloor.us starts their loans at a minimum of 50K and minimum interest rate of 5.5%. I know you don’t control the ads, but using a company that uses this kind of bait-and-switch tactic is not BP-like, and I’m sure BP will ensure the folks at Groundfloor clean up their ads or BP will find a new sponsor. Maybe this is small potatoes to some folks, but to me it’s dishonest at best, and if it were my company, I wouldn’t want any part of that.

  2. Christopher Smith

    My manager’s do all the tenant screening, so I don’t get too involved with the process.

    However, your first point was very interesting (i.e., making sure the person applying does not come back deceased), on a somewhat related matter. I sold my vehicle a couple of years ago to an individual who filled out all the required paper work which I dutifully sent to the State so there should be no problems for me right? No quite, this person was not who he represented himself to be (that guy who was the source of his identity was in fact dead).

    The live guy apparently went on to use the car to go out and incur whole multitude of traffic violations, parking tickets, and various and sundry crimes. Some of the jurisdictions that handed out these violations turned over the non payment of those fines (imagine that he didn’t pay them all), to various credit collection agencies and some of those organizations came after me. Of course that’s an unethical issue all of its own right that I don’t need to go into here.

    In any event. the moral of the story is make sure you know exactly who you are dealing with or you may just be opening up a can of really ugly worms.

  3. Alex Boyce

    Hey Brandon! Thanks for posting this – great article.

    Regarding #6, what minimum credit score do you look for? Do you consider it an automatic deal breaker to be under that number or will you make exceptions if all of the other “boxes are checked”?

    Thanks!

  4. Rose C

    Good info as always Brandon.

    So what do you do when your property manager wants to place a tenant that is not (in your opinion) qualified? What if that tenant defaults on the rent and you have to evict, who is responsible for those expenses? You or the manager?

    I ask because I am dealing with a property manager who tells me that if the applicant has 2-3 times the monthly rent in income they qualify. When I inquired about their other debt and if they had a savings account I was told that having a savings account is not a requirement (well of course it isn’t but it is a good indicator of where the rent will come from if they lose their job). I was also told that other debt is irrelevant. Okay, so they’re income is 3X the rent, but what if they have a few high balance credit cards with big payments, car payment, alimony, etc. Are we not allowed to inquire about their whole financial picture???

    Any advice and/or comments appreciated.

    • Leslie Hamilton

      I don’t have an answer to your question, but rather a personal experience to share related to this. Our former property management company required income to be 2.5x the monthly rent. My husband and I like to see 3x the rent. Our property management company sent us THREE couples who were close to the 2.5x metric, but not quite there. One didn’t have a job but had “good prospects,” while another had a cat and we have never allowed cats. The last one didn’t have verifiable income (they counted the $500 that their 20 year old son paid to the family in rent as income). After we passed on the third prospective tenants (none of which met the lower 2.5x rent threshold) our property manager dropped us for refusing to accept qualified tenants. These were the only 3 applicants after the property was listed for 5 weeks.

      Based on our experience, I would say stick to your standards or find a new property management company who will respect your standards. After we took over managing the property ourselves, we had people get into a bidding war within 24 hours of listing our property on Zillow. We ended up renting the place out within 24 hours for $100 more per month than we were asking to a couple with credit scores over 800 who make 4.5x the rent and they signed a 2 year lease. To the property management company our house was just another one of their hundreds of houses and they weren’t as personally invested in renting it out. I also think they were only feeding us applicants who were using their company to try and find a rental making it a conflict of interest.

      • Rose C

        Thank you for sharing your experience. Glad it worked out for you.

        We are greatly concerned that in addition to the lack of credit/financial information, they would be paying 50% more in rent if we agreed to lease to them. This is a huge jump and there is no proof they would be able to sustain the rent. The state (MD) is not landlord friendly and we don’t want to get into a situation where they move in, pay the rent for a couple of months the go into default. Then we would have the costly and time consuming task of evicting, which the PM would be contractually obligated to do, but would be charging us in the process. Not the way I do business.

        I’ve written them a letter outlining our expectations. We’ll see how they respond.

        We are evaluating whether to keep the PM company or not as the leasing qualifications are not the only issue.

  5. Art Veal

    Brandon, I deal with affordable housing and I have been screening by bank data instead of credit and it has worked great. I have been a landlord for years and gave up on credit reports a long time ago. Many of my tenants either don’t have a real credit file or they had a lot of issues. I am more concerned with how they pay and their ability to pay. By using bank data I can see that and I have had a lot of success with tenants that many others would have turned away.

    People that have poor credit profiles still deserve quality housing and if you have a good way to find them other than the credit report you can find some really good and thoughtful tenants. Just my 2 cents.

    • Rose C

      I am thankful for landlords that qualify tenants based on circumstances and not credit alone. I am interested in finding out more about your process. Do you have them submit bank statements? or is there another report that you obtain directly from the bank?

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