What Is a Background Check for Renting in the U.S.?

Have you been asked to provide or submit to a background check when trying to rent in the U.S.? No need to worry as it’s a standard step in rental agreements.

But what is a background check for renting purposes, how much does it cost, and what does it include?

Basically, it is a very similar procedure to any other background screening, as it shows your credit, employment, rental, and criminal history. The length of time it takes to conduct a background check can vary on the state where you live.

If you are a landlord, it is important that you know how to conduct a background check to ensure that you are renting out your property to the right person. 

Below we tell you more about it, so keep on reading!

What Is a Rental Background Check?

Rental background screenings are a valuable tenant screening tool landlords use to obtain important information about the applicants’ past behavior. That way, they’ll know whether or not they are leasing out to responsible and trustworthy tenants.

Most of the data on a background check originates from the country’s major credit bureaus, but extensive screenings also include criminal, driving, and educational history. A tenant screening may also differ from a standard background check. 

However, due to the sensitive nature of this information, renters need the applicant’s approval and personal data to run a background check, such as their name and social security number. That said, owners are required to notify the potential rentee if and when they deny their application based on information obtained from the screening.

What about the cost of a background check for renters?

Depending on the exact state, service, and information contained within, background screenings typically cost between $25 to $75—a fair price as long as the background check and the issuing agencies comply with the Fair Credit Reporting Act (FCRA).

Also, while some landlords require potential tenants to pay for the check as part of their “tenant screening fee”, not all do, and you can easily streamline the entire process by choosing who pays for it if you hire the services of a good tenant screening platform.

What Shows up on a Rental Background Check?

Now, let’s see what exactly a regular rental background check contains.

1. Address History

If you’ve ever given out your address to any corporation for whatever reason, it is most likely included in some database or another. Screening companies then pull this information based on your name when compiling your background check. It is even possible to find someone's address using a phone number.

Having said that, past address history is unreliable and may not show if the applicant rented or owned that property. Because of that, renters may contact the new owners at these addresses to get further information about you.

2. Credit Report

The applicant’s credit score is perhaps the most critical piece of data found on a background check that landlords always consider. Essentially, it reveals the rentee’s creditworthiness, indicating whether they can keep up with their payments on time.

With this in mind, credit scores are typically evaluated on a scale of 300 (bad) to 850 (excellent). While higher numbers signal that the applicant is financially stable and successfully fulfills their payment obligations, scores near the lower end of the spectrum are a sign that they have been late or even defaulted on a loan in the past.

Note: Your credit report will also include your tradelines, i.e., your active accounts, such as revolving credit cards and fixed payment accounts, like auto or student loans.

3. Resident Score

Certain credit bureaus, such as TransUnion, also furnish so-called resident scores, which are a more accurate version of the credit reports mentioned previously, as they highlight only those aspects that are of interest to the landlord.

The main factors considered in your resident score include, but are not limited to, your payment history, the way you utilized the credit, inquiries, and all the credit lines you obtained.

Note: Resident scores also resolve discrepancies between FICO’s and VantageScore’s different scoring models as it equalizes them on a single scale.

4. Eviction History

Another vital piece of data to be considered is the applicant’s eviction history, as it directly demonstrates whether or not they have been a respectful tenant.

Detailed background checks will list all the previous rental agreements the applicant has signed and under which circumstances they were terminated. If there are any eviction instances, they will include the location where the eviction took place, the date it was processed in court, and the judgment amount that the tenant owed.

Note: Sometimes evictions occur due to sickness or a job loss that prevents the occupant(s) from meeting their responsibilities.

5. Income Checks

Evaluating the potential tenant’s current employment and position also helps landlords determine the size and regularity of their income checks, which shows whether or not they’ll have enough funds to meet their monthly payments.

Therefore, you may also be required to present proof of payment, such as a payslip or direct deposit records showing you indeed receive a salary.

6. Criminal History

Property owners are allowed and encouraged to run a criminal history check as well, as they should exercise caution when renting to tenants with past criminal histories.

However, since applicants who have had trouble with the law are also prejudiced against, certain jurisdictions also prohibit running a criminal background check.

To help applicants from being unfairly rejected, the U.S. Department of Housing and Urban Development (HUD) also issues rental guidelines to tenants with criminal histories. Basically, HUD states that landlords should consider the date and severity of the conviction and whether or not the applicant has kept a clean record afterward.

7. Public Records

Certain personal and publicly-available records, such as tax liens, civil judgments, and bankruptcies, may also be considered during the rental agreement process.

For instance, landlords may choose to lease to an applicant with a Chapter 13 bankruptcy as it means they have repaid most or the entire debt. Conversely, Chapter 7 tenants are typically rejected since it does not include a repayment plan as in Chapter 13.

Similarly, applicants will have to make certain concessions if their public records reveal that they owe payments in taxes or due to civil judgment obligations, so their initial security deposit, the monthly rate, and the agreement duration may be affected.

8. Consumer Statements

Applicants may also add a personal statement to their credit report to explain things in their favor. As an example, if you were forced to take out a significant loan to cover a medical procedure, you can explain your reasons for that.

However, the most common reason why consumers may want to elaborate further is to report an identity theft incident that negatively affected their credit scores.

9. Inquiries by Other Businesses

If you’ve ever had to do business with financial institutions or purchased an expensive product with a loan, your creditworthiness was most likely checked.

Landlords can see all instances of any such inquiries on your background report, which may prove relevant to your application if they show you frequently shopping around for loan products. That said, rental credit checks do not affect your credit score in any way.

The Benefits of a Rental Background Check

Mandatory or not, a background check proves useful to all interested parties, including the property itself. Let us tell you why:

1. For the Owner’s Finances

The landlords’ motivation to screen their tenants is financial in nature, as they seek to rent to responsible applicants who can pay their rent on time and avoid property damages. Moreover, they reduce the risk of evictions and unexpected vacancies, which typically result in a loss of funds for eviction costs and property maintenance.

2. For the Property Itself

Well-behaved applicants are likely to keep the property in pristine condition or even fix or upgrade it down the line. Since property crime costs managers and landlords millions of dollars yearly, rental background checks reduce the upkeep costs and the risk of renting to irresponsible renters who are likely to vandalize the place.

3. For Other Tenants

Applicants who have nothing to hide and have been exemplary tenants in the past should always insist on getting a background check, as it will serve as their bargaining chip to obtain more favorable terms, such as a longer agreement and/or reduced payment size.

Bottom Line

Now that you know what is a background check for renting, you surely understand its importance as it ensures you lease the property to a reliable candidate with no prior legal issues. However, rental applicants can also get and evaluate these background screenings. That way, they’ll learn whether or not a past action diminishes their chances of a successful application, so they’ll know when to apply for a background check correction.