Public data access is constantly changing, and much of that change is driven by consumer rights groups. As privacy and discrimination laws have evolved, the amount of information available to the public has become more limited instead of expanding. Commercial data providers often add to the problem by reducing information access to decrease liability.
Comprehensive background checks help bridge the information gap by providing better overall information. These reports typically include credit history, rental verifications, employment/income verifications, and public records check. It is true basic credit and court record checks are still popular due to lower costs and faster turnaround times. But for those landlords looking for depth and detail, a comprehensive report can be extremely useful.
Credit reports show financial responsibility but limit details
Payment history has always been the building block of any tenant screening background check. Credit reports provide credit account payment history, as well as the outstanding debt a consumer is responsible for paying. Landlords should take credit history into consideration but also keep in mind a potential renter’s credit history should not be the only factor in making a decision.
Credit reports are a fantastic tool but they are limited to financial information on credit accounts. Collection information is dependent upon a creditor providing that information to a bureau. Because of this, rental collection information on credit reports is not guaranteed. An applicant can owe money to a landlord without that information being reported to a credit bureau.
Court records may provide eviction dates and judgment amounts but little to no information surrounding the reasons for eviction. Even if a judgment is awarded in eviction proceedings, landlords often do not follow through with filing judgment information through the court system. They simply evict the renter and move on.
In the coming months, there will be significant changes to the public record information that is reported by the credit bureaus. The greatest impact will be on reporting of civil judgments – including judgments in favor of the landlord in eviction actions. This will place even greater emphasis on the importance of verifying rental history as part of your tenant screening process.
Rental verifications add value and perspective
Prospective landlords can use rental verifications to gain insight into what kind of renter someone has been. More than just dates of residence or payment history, these verifications contain valuable detailed information such as:
- Residence dates
- Rent amount
- Payment history
- Lease violations
- Noise complaints
- Balance owing
- Pet violations
Using rental verifications means you should define acceptable rental history in your criteria for prospective renters. Think about the different elements of a rental reference and consider what you would like to see from a verification.
Some questions you might ask yourself:
- How many months of rental history would I like to see?
- How many late payments do I consider acceptable?
- Am I concerned about noise complaints or lease violations?
- Is there an acceptable balance owing to a landlord?
Verifications have one significant drawback and that is turnaround time. They require someone reaching out to a landlord, often following up multiple times, to obtain a reference. Requesting applicants provide landlord contact information (name, phone, email) at the time of application will reduce delays. Advising applicants to reach out to their landlords and let them know to expect to be contacted can also be helpful.
The bottom line
Every element of a background check provides a valuable piece of the puzzle. Taken separately, each element has its drawbacks. Background checks which contain both financial information and reference checks provide landlords with the best available information on which to base a decision.