Many of you know that running background and credit checks are essential steps to vet your applicants, but do you really know what this step is good at — and not?
Background checks are great at 3 things that you, as a landlord, want to know about your applicants:
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Are you who you say you are?
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Do you have a history of paying your bills and managing your overall finances well?
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Are you worthy of this asset, this neighborhood, these neighbors?
Let’s dive a little deeper into these 3:
Are you who you say you are?
In this digital age, pretending to be someone that you aren’t is all too easy. The number of reported identity theft victims rose to about 490,000 in 2015, up 47% over 2014 [source Marketwatch, “Identity Theft Complaints Soar”, Janaury 28, 2016]. Were someone to successfully move into your rental property under the guise of another identity, you could stand to lose thousands. When I was leading the largest tenant background screening company in the country, large REIT’s and property management companies would report from time to time that ‘gypsies and fraudsters’ were a big problem, informally meaning highly transient individuals who would gain access to an apartment under the guise of another identity, and stay until the very last minute, without ever paying anything — and then move on.
Bureaus use their extensive data linking technology to match against their millions of records to return “identity header” information on their reports – it’s up to you to follow through. Look for potential problem indicators such as different names used in the past, a different current address than the one reported to you, and expired or unissued Social Security #’s. Follow up on every detail and ask open-ended questions such as “would any other names be associated with you?” rather than “are you divorced”? Ask for detailed proof if you haven’t already, get copies of utility bills with the addresses and names, or more identity proof than a driver’s license.
Do you have a history of paying your bills and managing your overall finances well?
The credit report is a useful tool for determining what types of debt your applicant uses, how much debt is outstanding, and how the debt is paid and managed. Don’t just look at the credit score, that is a useful tool but not the only one. How many credit cards are in use, what is their balance, are there missed payments, is the debt growing or declining? How many recent inquiries are reported. There are different types and purposes of debt – do you want to be more forgiving of medical debt or student debt? Would you accept applicants with a prior bankruptcy? Have a plan in mind so you don’t fall into a victim trap.
Are you worthy of this asset, this neighborhood, these neighbors?
It goes without saying you desire a resident that won’t disturb the peace and will leave the property in good shape. This is where the criminal report comes in – does your applicant exhibit respectful behavior that your fellow neighbors will appreciate? Or, will they be bringing trouble to your vicinity. An equally undesirable situation is one in which your resident pays but creates havoc, increasing your phone calls, workload, and stress. Again, have your acceptance criteria in mind first so you don’t fall into the victim trap. Is a misdemeanor OK? Multiple? What about felonies? Pay attention to the details here and ask good questions. People can change, but do you need to take risks on your property right now? These are some of the questions that will inevitably rise.
In summary, background reports are incredibly useful and an essential part of the process – but you need to be informed about what they represent and don’t, and how you can use them to follow up and protect yourself and your investment.
Rent Marketplace helps independent landlords and local property managers save time and money with our one-stop shop solution suite. With integrated online applications, tenant screening, state-specific leases and more, users can find and move in better residents faster, while going paperless.
For additional information on Rent Marketplace, please visit our site at www.RentMarketplace or call us at 866-973-0971. You can also follow us on Facebook, Twitter, LinkedIn, and Google+.
“Potential Gotcha”: One fact that many don’t understand is that the background report does not definitively say whether a Social Security # belongs to an individual, confirming his/her identity. What the report can confirm with the Social Security Administration is whether (1) that SSN was ever issued (2) the issuance correlates to your applicant’s birth year and (3) if the SSN has expired/ is associated with a deceased person.
“Potential Gotcha”: Universally, landlords don’t want to rent to someone who owes a prior landlord – but this type of debt is rarely on a standard credit report (read more blogs to understand why). Calling current and prior landlords is essential homework that a standard credit report doesn’t really help with. Prior evictions may be shown, but they take time to work through the courts. Similarly, collections may be shown but frequently are not easy to discern as a rental collection versus another type.
“Potential Gotcha”: Only convictions are displayed in a criminal report, and rightly so. Arrests are not listed, so beware of someone who may have recently been arrested and is now moving. You may want to avoid someone who has a history of frequent arrests, or someone who lies on their application.
Rent Marketplace helps independent landlords, property owners and local property managers save time and money with our integrated one-stop shop solution suite. With online applications, tenant screening, state-specific leases and more, users can move in better residents, faster.
For additional information on Rent Marketplace, please visit our site at www.RentMarketplace or call us at 888-973-0971. You can also follow us on Facebook, Twitter, and LinkedIn.
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