The first step to finding good renters is tenant screening, and it starts with a good Rental Application. If a prospective tenant passes on paper, the next best step is to verify their information, including income and rental history. No one can foresee the future, but a comprehensive screening can help you see any red flags that may exist.
Background check reports are simple to obtain. You should run a background check on all prospective renters. It is not expensive and you can pass along the price to the applicant. Generally, reports cost between $20 and $40. All three credit reporting agencies (TransUnion, Experian, Equifax) offer background check services. While there are other services offering background checks, the three reporting agencies are Federal Credit Reporting Act (FCRA) compliant, whereas some other lower-priced services may not be. You can decide how comprehensive you want the reports to be. The two things you are looking for is a good credit history and a lack of criminal history. A background check report usually includes credit history, criminal background, and an eviction report. Some will also include a credit score. You will need permission from your prospective tenant to perform a background check.
Verifying income is not difficult. You can request an applicant's pay stubs, copies of their W2s, bank statements and/or a tax return transcript (Form 4506). You can also request a Salary Verification Letter from their employer. If the person is self-employed or a contract worker, which is increasingly common these days, you can review a few months of their bank statements and/or tax returns to estimate their average income. Keep in mind that W2s, tax information and social security numbers are personal, and that information should be protected as best you can.
It is up to you how much information you want to share about what you are looking for in a background check. If you have a certain credit score in mind, it may help to share that information. If the prospective tenants already know they have bad credit, it will save everyone time if they simply choose not to apply. In terms of criminal backgrounds, you may benefit from consulting with your local housing authority to make sure you do not discriminate against a protected group. It is important to understand the housing discrimination laws that apply to your situation before you start looking for tenants. If you have doubts or questions, ask a lawyer.
If their profiles are public, you can look at them, but you may not be able to use the information you see to discriminate. It is extremely difficult to use what you learn on social media in a non-discriminatory way. Maybe you'll see that you think they drink too much or that they belong to a political group you do not agree with; these two things might not even be true and may not be reasons that you can legally reject an applicant. You must not violate fair housing laws. It is best to judge your tenant on legitimate reasons such as credit history or eviction history.
You can reject an applicant for a variety of reasons including bad credit, previous evictions, non-verifiable income, and more. Before you decide against offering a Lease Agreement to a prospective tenant, make sure you are deciding against them as renters for legitimate and legal reasons. If the applicant is denied due to the information in their credit report, you generally must provide an Adverse Action Notice to them. An Adverse Action Notice includes the reasons they were denied, the credit agency used to obtain the information, and how to contact that credit reporting agency. If you are denying them because of their criminal background, you must provide them with a denial letter and instructions on how they can obtain a copy of their criminal background report. Keep the application and associated reports for your records in case your decision is challenged. If you have questions about how to communicate a denial, ask a lawyer.