What Every Landlord Needs to Know About Tenant History Checks
The right tenant can make or break your experience as a landlord. You have an apartment that needs to be rented out. You want someone who will pay their rent on time, care for the unit, and generally not be a nuisance. This should be simple, right?
It’s anything but. But most landlords come to this realization far too late. A nice interaction and feeling do not suffice in giving a stranger the keys to your home.
But Why Does This Matter?
Your rental property is likely one of the largest investments you’ll ever make. Once someone moves in, you are giving them access to your investment that costs hundreds of thousands of dollars. They could be the best tenants and stay for the next ten years. Or, they may fail to ever pay rent after month two and leave your unit in disarray.
What’s the difference? Information. Research before you sign on any dotted lines.
A tenant history check is not an act of paranoia but an effective way to be fiscally responsible. The average landlord investigates credit scores and employment verification – and no offense to them, but yes, these things matter – but rental history is where it’s at. An individual who has always paid their rent on time at their last three apartments – great. An individual who was late every month at their last three apartments? Guess what? They’ll be late at your unit as well.
What Can You Legally Check?
Not everything you want to know is subject to investigation for a good enough reason to decline or accept a rental application. Tenant screenings are somewhat location-based, meaning things that apply in your area may not apply across borders, but there are universally acceptable topics.
You can inquire about credit reports. Usually, that’s a go. You’ll want to see if someone’s had problems paying bills in the past, current debt issues, or whether they’ve been through bankruptcy proceedings. Employment checks are also fair. You have the right to know if someone works where they say they work and earns what they say they’re earning.
What you can do that’s one of the best checks is reach out to previous landlords. You’ll gather information that wouldn’t appear on a credit report alone. Did they pay rent on time? Cause damage? Noise complaints? Did they provide adequate notice before moving?
Landlords can also obtain verified documentation from databases with personal information – the bad tenant list in Ontario is generalized but exists in some form elsewhere, and understanding how these systems work relative to regional privacy laws helps landlords make educated decisions relative to regulations for those involved in the process.
What Credit Reports Will Tell You
Everyone talks about credit scores, but what do you look for? A credit report is essentially how someone deals with money owed – creditors or loans they owe money to; if they pay them on time; if they’ve been sent to collection agencies; or whether there are judgments against them.
However, credit reports do not tell you everything about anyone. Someone could have a terrible credit score but be the noisiest tenant on the block with their state-of-the-art surround sound blasting at 2 am and yelling at their children or spouse nightly. On the contrary, someone else could have impeccable credit – they just lost their job – and had been a model tenant for five years.
Some landlords look for scores of 600 or 650 – fair enough – but don’t use it as a one-number deciding factor. Instead, look for trends. Do they have recent late payments? Collections from other landlords? Are all of their credit cards maxed out?
Note that you need written permission to run someone’s credit – don’t assume you can do it without telling them first. Most rental applications include this consent within the first couple of pages anyway.
Why Landlord Calls Are Worth the Effort
This is probably the number one best thing you can do. Past behavior is the best predictor of future behavior, and past landlords are likely to have nothing but honesty back at you.
Ask specific questions when calling; don’t ask were they good tenants – that’s too vague. Ask if rent was paid on time every month without fail. Ask about property damage over ordinary wear and tear (this could mean a pet or children). Ask about neighbor complaints – did they abide by lease terms?
Here’s a trick used by some landlords: Ask for the landlord before their current one. Why? Because if someone’s current landlord wants them gone, they might give glowing accolades just to get rid of them – or worse, fail to give a reference either way. The landlord from two apartments ago has no incentive one way or another.
Pay attention to how people respond, too. Hesitations or vague answers mean something; relief from a landlord admitting they’re glad a tenant is leaving means something.
Income Verification 101
Standard rules dictate that tenants need to earn three times the monthly rental payment – therefore, if rent is $1500 per month, they need to earn $4,500 per month. Otherwise, they cannot afford the unit. This isn’t arbitrary – it’s based on 30% of someone’s income being allocated for rent – which is about the maximum percentage someone can realistically afford without backlash.
Verifying employment is easy enough. Call HR. Ask for pay stubs; get letters from employers validating inquiry efforts; check bank statements for consistent deposits.
Be wary of employment status changes, too. Someone who makes good money now but has only worked for two weeks might be more risky than someone who has been with the same company for five years. This doesn’t mean reject them, but consider it.
Red Flags You Can’t Ignore
Some red flags are glaringly obvious: if they lie on their application, deny entry (you wouldn’t want them as a tenant anyway). If they can’t give you previous landlord references – step back and question why not – or if they’re evasive or trying to rush you through the process – slow down.
Some red flags aren’t so obvious – lots of short-term rentals could show an inability to keep tenants due to eviction proceedings. Gaps need explanations – where were you renting before X date? Finally, a potential tenant can refuse to allow a credit check – but if they do, you can deny them based on that reason alone.
Making The Decision
Once you’ve compiled all your information – it’s time to choose. The most critical aspect is consistency and fairness in how you determine someone’s approval or denial.
If you’re going to choose not to rent to someone – it better be based on legitimate criteria associated with previously rented properties and not race, sex, religion, family status, disability – protected classes – and applicable rejections must come from approved criteria.
Keep every record. Applications; credit checks; notes from calls with owners – and if someone decides to go against your decision later, you’re going to want proof that you circled all the right steps and based your decision on appropriate reasons.
Great screening steps won’t take forever – if you’ve got information to make a good decision – not in the sense of filling your vacancy as soon as possible before it spirals further out of control – but long enough that good tenants don’t end up going somewhere else for subpar living conditions you could have provided otherwise.
Most landlords take 2-3 days if they’re on top of everything – spending two hours investigating now is far better than spending two months getting red flags fixed with consistently late rent payments or boarded up windows due to excessive damage or eviction court woes overall.
Don’t let desperation make you skip necessary steps – the screening process is in place for reasons bigger than you.