How to Do a Background Check on a Potential Tenant

Checking into a potential tenant's background is a standard safety precaution performed by landlords or property management services to reduce tenant turnover and potential liabilities. If you're a landlord, tenant background checks are the most direct way to identify red flags and avoid problematic court cases. Even though time-consuming, a thorough tenant background check and screening will ensure you select suitable tenants for your rental property. Here's a quick guide that covers how to check your tenant's background.

What Is a Rental Background Check?

Let's start with the basics. A rental background check is a process conducted by landlords or property managers to evaluate the suitability of a potential tenant for a rental property. It involves gathering information and assessing various aspects of the applicant's background to determine their reliability, financial stability, and suitability as a tenant. The rental background check typically includes components such as credit history, criminal records, eviction history, employment verification, and rental history. By conducting a thorough background check and looking into employment and income information, landlords can make more informed decisions and minimize risks associated with renting their property to an unsuitable or high-risk tenant.

What Does a Rental Background Check Consist Of?

As you can imagine, a rental background check is a crucial step in the tenant screening process. It helps landlords and property managers assess the suitability of potential tenants and can avoid future frustrations with unsuitable tenants. Here are the key components typically included in a rental background check:

• Credit history: Assessing an applicant's credit history provides insights into their financial responsibility, payment patterns, and debt management;
• Criminal records: Checking criminal records helps identify any past convictions or pending charges, ensuring the safety and security of the rental property and other tenants;
• Eviction history: Evaluating eviction history helps determine if the applicant has been previously evicted or has a history of late rental payments or lease violations;
• Employment verification: Verifying employment details validates the applicant's current and past employment, income, stability, and ability to meet rental obligations outlined in the lease agreement;
• Income verification: Confirming the applicant's income ensures they have sufficient financial resources to afford the rental property;
• Rental history: Reviewing the applicant's rental history provides information about their past rental experiences, including any prior lease violations or issues with previous landlords;
• Public Records: Public records searches may include checking bankruptcy filings, civil court records, and other relevant legal information to assess the applicant's overall financial and legal standing.

By conducting a comprehensive rental background check, both landlords and property managers can make informed decisions and select reliable tenants for their properties, minimizing risks and promoting a positive rental experience. This peace of mind is priceless in finding prospective tenants that will be a good fit for your property.

How to Do a Background Check on a Tenant

Step 1: Understand the Legal Background

To screen prospective tenants, you'll first need to research their backgrounds. Understanding the legal background of tenant checks is crucial to ensure compliance with relevant laws and regulations governing the screening process.

When it comes to ensuring fair and equal treatment in the rental market, the Fair Housing Ordinance plays a vital role in Chicago. The Fair Housing Ordinance in Chicago, also known as the Chicago Residential Landlord and Tenant Ordinance (RLTO), is a crucial piece of legislation designed to ensure fair and equal treatment in the rental market. Introduced in 1986, the RLTO provides guidelines and regulations to protect the rights of both landlords and tenants.

The Fair Housing Ordinance prohibits housing discrimination based on protected classes, including race, color, sex, religion, national origin, disability, familial status, and sexual orientation. It aims to create a level playing field for all individuals seeking housing opportunities in the city.

In addition to the RLTO, Chicago implemented the Just Housing Amendment to the Human Rights Ordinance. Introduced in 2019, the Just Housing Amendment addresses housing discrimination based on criminal records. It prohibits landlords in Cook County, Illinois, from inquiring about an applicant's criminal history or conducting a criminal background check before making a conditional offer of housing.

The Just Housing Amendment promotes fair housing practices by providing individuals with criminal records a fair chance at securing housing. It encourages landlords to evaluate applicants based on individual merit, considering factors such as the nature of the offense, the time elapsed since the offense, and evidence of rehabilitation. By implementing the Just Housing Amendment, Chicago aims to reduce barriers and foster inclusive housing opportunities for all residents.

Step 2: Obtain Tenant Consent

Obtaining tenant consent is a critical step in conducting a background check and maintaining legal compliance throughout this process. When you're initiating the screening process, it's essential to secure written consent from the tenant. This consent should clearly outline the purpose of the background check and the information that'll be obtained and evaluated. By obtaining written consent, you ensure that the tenant is aware of and agrees to the background check process.

The written consent should also include a statement acknowledging the tenant's understanding of their rights under the RLTO, specifically regarding the use and protection of their personal information.

Step 3: Collect Tenant Information

To conduct a thorough background check, gather essential tenant information to assess their suitability as a renter. You should obtain the following details:

• Full name: Obtain the tenant's full legal name to ensure accurate identification;
• Date of birth: Verify the tenant's age to comply with legal requirements and determine eligibility;
• Social Security number: Request the tenant's Social Security number, which may be necessary for credit and background checks;
• Contact details: Gather the tenant's current phone number, email address, and any other relevant contact information for communication purposes;
• Driver's license copies: Request copies of the tenant's driver's license or other identification documents to verify identity and address;
• Current and previous addresses: Obtain a comprehensive list of the tenant's current and past residential addresses to evaluate stability and rental history;
• References of previous or current landlords: Ask for the contact information of previous or current landlords to verify the rental history and obtain feedback on their tenancy.

Step 4: Run a Credit Check

The aim of obtaining a potential tenant's credit report is to assess their financial viability. Credit reports reveal unlawful evictions and lawsuits, bankruptcies, and foreclosures. Credit companies provide credit scores, of which the typical score required for renting is over 620. By assessing credit history, and banking and credit references you can identify how much of a risk a tenant poses.

In addition, you can acquire a credit report from major credit reporting bureaus like TransUnion, Experian, and Equifax after opening an account and doing credit checks by following their online instructions. If you deny an applicant due to their negative credit score, you have to send them an “adverse action” letter.

This letter informs them why they were rejected, the name and agency that reported negative information, and their right to obtain a free copy of their credit report if they request it from the agency within 60 days of receiving the letter.

The Fair Credit Reporting Act (FCRA) requires landlords to request a tenant's permission to perform a credit check. FCRA compliance entails completing a credit card report authorization form before obtaining an applicant's credit report. According to law, if a potential tenant refuses to sign a credit authorization form and/or doesn't allow you to perform a credit check, it is within your right to deny them the ability to lease your property.

Step 5: Conduct Criminal Background Check

While you're focused on a tenant background check, you'll also want to factor in the safety of others in the building. You can achieve this through a comprehensive criminal background check. Utilize authorized resources and comply with local and state laws governing background checks. This process aims to identify any criminal convictions or pending charges that may pose a risk to the property or other tenants.

Step 6: Verify Rental History

Next, contact previous landlords or property managers provided by the tenant to verify their rental history. Inquire about their payment habits, lease compliance, and any history of eviction, or lease violations. Make sure to adhere to the guidelines outlined in the RLTO when requesting and sharing rental history information.

Step 7: Verify Employment and Income Data

Prospective tenants should also have verified employment and data. Verify the tenant's employment details to assess their ability to meet rental obligations. You can contact their employer or request pay stubs, employment verification letters, or other relevant documents. Compliance with RLTO provisions regarding income verification is essential to ensure fairness and consistency.

Step 8: Check for Eviction History

You'll then want to perform an eviction history search to identify any instances of previous evictions or patterns of late payments or lease violations. Follow the guidelines provided by the RLTO on handling eviction history information and comply with fair housing laws to avoid discriminatory practices.

Step 9: Contact Personal and Professional References

Reach out to the personal and professional references provided by the tenant to gain insights into their character, reliability, and suitability as a tenant. You should contact these references and ask relevant questions about the tenant's general demeanor, the condition of their previous living spaces, credit references, and whether they would recommend the applicant as a tenant. This helps in assessing their overall suitability and compatibility with your rental property.

By conducting a comprehensive background check using the information gathered from these steps, you can make an informed decision about the prospective tenant's suitability for your rental property while complying with the relevant laws and regulations. Even though a background check is more work upfront, it can significantly increase the chance that you select suitable prospective renters.

What About Tenant Screening Services?

Smart landlords play defense by using a professional tenant screening service to screen applications. They perform a background check as part of your tenant screening. Most tenant screening companies develop packages for their clients, depending on the data they require. Clients frequently ask, “How do I run a background check on a prospective tenant?”.

Truthfully, hiring someone to do it for you is the easiest way. When hiring a tenant screening company, be sure to look for a high accuracy rate, whether they offer a reputable credit report, criminal background check, sex offender registry, and eviction history check, as well as using top security measures.

You'll want to develop a strategy before hiring screening company services that cover the following:

1. A Payment Plan

A background check can range anywhere between $40 and $500. You'll need to decide whether the price is integrated into a rental application cost or if you're going to foot the bill. Bear in mind; sometimes property managers want to make their offer more compelling and don't require tenants to pay for screenings. However,  this increases the risk of losing good tenants if you're dead set on saving a few bucks.

2. Know How to Use the Information

If you're a fair landlord, you'll want to hold all potential applicants to the same standard. This means establishing your non-negotiables. For example, do you consider teenage misdemeanors to be a deal-breaker? Will you reject all criminals with minor misdemeanors or just felonies? Make sure that you're clear about these boundaries and the law to ensure you don't face unfair discrimination charges.

3. Understand the Law

To extrapolate on the previous point, the Fair Housing Act provides a clear outline of what you can and cannot do as a landlord. For example, you may not reject anyone because of their race, gender, religion, disability, or sexual orientation. According to the act, “individuals who believe they have been victims of an illegal housing practice, may file a complaint with the Department of Housing and Urban Development (HUD) or file their lawsuit in federal or state court”.

The Bottom Line

Conducting a thorough background check on potential tenants is vital for landlords to make informed decisions and ensure the best tenants for their rental properties. As a Chicago-based property management company, we understand the importance of tenant screening in the local rental market. That's why we offer professional tenant screening services as part of our comprehensive property management solutions.

With our expertise in the Chicago market, access to reliable screening resources, and commitment to privacy and compliance, we assist landlords like you in finding reliable and responsible tenants specific to the Chicago area. Trust our dedicated and passionate team to navigate the complexities of tenant screening, ensuring fair practices, and helping you select the right tenants for your Chicago rental properties.

Contact us today at 33 Realty to learn more about our tenant screening services in Chicago.