Legal Credit Checks

 TOS - Privacy Policy
Fair Credit Reporting Act

sample reports at end of text

Tenant Credit and Background Checks

In the business of tenant credit and background checks you have to step very carefully and be wary of the Fair Credit Reporting Act in performing your work so as to not violate your tenants' or applicants' rights. Having a cheap and fast way to get the right phone number can make a huge difference in getting that good tenant reference.

Getting a Release Form Authorizing a Credit and Background Check Is CRITICAL to the Legality of Your Investigation

The release form background check authorization document you get signed at the beginning of your screening is equally valuable as the information you get from your search. Many people new to investment real estate often don't know which type of background check to get and wind up either not doing one at all or doing the wrong type. Ultimately lack of preparedness led to lawsuits or eviction fights. Not fun. Given how inexpensive preparedness is it's a wonder more people didn't do it the right way.

Step 1: Advertising - Accumulate A Large Number of (Good) Tenant Applications

If you're new to the business of rental apartment income, your first thought needs to be on advertising, even if your units are all presently occupied. I continuously advertise rental units so I always have a good selection of applications on hand at any given time. Vacancies can happen at any time - so best to be prepared with pre-qualified prospects ready to call in for interviews.

First Comes Consent, Then Comes The Rental Application

The minute someone identifies themselves as a potential applicant, you have to get to discussing the consent form and getting their signature on it. Let me repeat: the release form background check document comes first. Your consent form needs to indicate to the rental prospect that they must authorize a complete credit and criminal background check prior to even receiving an application. You have no idea how many bad apples that will eliminate.

Step 2: Getting Rid of the Chaff - Culling Out the Good Tenants from the Bad

Step 2 is all about efficiency. I'm thinking about what kind of background check process will allow me to scan as many applicants as possible for as little cost as possible. A quick scan is enough first time through. Forms that are missing information or are sloppy, set aside or toss. Don't bother with them unless you completely run out of good applications.Once you have weeded out the folks that don't sign the application, don't put down references, don't include their social security number, etc. it's time to use a pre-screening service. Some will go through the trouble of giving phony information on the application so a quick public records database search is a cheap way to catch those bad prospects. Check the references phone numbers - are they legit? What about the social security number? Valid?The nice thing about doing a screening yourself is that access to public records is cheap. Not to mention fast. Cutting large groups of applicants down is done quickly this way.

Step 3: Vet Their Credit Background History

Now the hard work starts but it is all in the name of getting the best candidate so let's do it. Select who you think the best two applicants are and bring them in for a chat. Use the interview as an opportunity to get any unclear facts straightened out.Remind the applicant(s) that they still will be subject to credit and criminal background checks after the 1st interview. Presuming at least one of the applicants appeals to you, run your FCRA credit check. These are not cheap, but it is the correct kind of background check to get when you need to get the legal credit reporting and criminal background information.

Step 4: Make the Offer to One of Your Good Tenant Candidates

If the rental candidate made it through step three, it's time to offer them a unit and get them signed to a contract based on your desired lease terms. If this first person doesn't come through, you've still got a number of other prospects ready to put through step 2 and 3.

Don't forget: the authorization release form for the background check comes first. Use your public records fact finder to get some knowledge about your tenant prospect. Use what you learn to be a little probative in your initial interview. Having a few facts in hand levels the playing field with you and your applicant. Checking how a person responds to a little bit of a challenging environment can speak volumes as to how they will fit in with other residents.

The credit check consent form - tenant is the most important document in your tenant application package. It is also the very first document your applicant should sign and return to you. Without that document signed and returned I don't even waste my time handing out the application package or spend any more time on that prospect. I simply say, "Thanks for stopping by, but we don't give out applications without a signed and completed credit check consent form - tenant."

It's really that simple. As a landlord you can not do a credit check on your rental applicants without a consent form. That being the case, why on earth would you ever waste your time with someone not willing to turn in a consent form?

What do you need to include on your form? Name of applicant (written and signature), witness name and signature, social security number. Some simple lingo: Indicate that the consent form authorizes you (the landlord, property owner, or apartment manager) to conduct a credit criminal background check and to review the accuracy of the information provided on the rental application and assess the credit worthiness of the prospective renter. Have copies of the fair credit reporting act handy to pass out to your applicant, and indicate on the form that you offered the FCRA to your prospect.

In summation:

Title of Form: Credit Check Consent Form - Tenant - Including Criminal Background

Name of applicant
Signature of applicant
Social Security Number of Applicant
Name of Witness
Signature of Witness
Your Name
Your Signature
Simple Lingo (above)

This will provide you a solid foundation on which to legally conduct a background credit check.  Download sample credit check release form.