Guide to Tenant Screening

Screen to find the best prospective commercial and residential tenants

By Wendy Davis

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Most experienced landlords will tell you it's better to have no tenant than a bad tenant. Screen each tenant with the same objective standards to ensure sensible business-based decisions – and to keep from violating Fair Housing Act (FHA)/Fair Credit Reporting Act (FCRA).

When screening commercial applicants, you'll focus on the company's history and information; when screening residential applicants, focus on the individual's info. To effectively screen tenants:

Require prospective tenants to submit rental application with proof.
Verify all information via phone calls and background/credit checks.
Comply with fair housing/fair credit/Patriot Act laws.

Action Steps
The best contacts and resources to help you get it done

Get the info and proof

Make sure applicants provide contact info for three prior landlords. Don't rely only on the current landlord's recommendation – check with previous one(s), too.

I recommend: Find rental applications at LawDepot: Residential Application or LawDepot: Commercial Applications.

Investigate applicant histories

Access credit reports with the applicant's name, address and social security number. For a commercial applicant, you'll need a business license/Federal Tax ID number to search. The more information you have, the more you can discover. Public records, accessible by anyone, include real estate, bankruptcies, tax liens and criminal histories.

I recommend: Visit TransUnion, Equifax, and Experian. Experian Small Business helps you assess possible commercial tenants. Use Intelius to screen residential applicants. Check out CitiCredit for a tenant screening costing $9.95 – with no membership/setup fees.

Call in the pros

Find a reputable tenant-screening company, and leave the in-depth assessments to them. Companies can screen by sexual offender registry, criminal records, SSN verification, and more.

I recommend: At ATS, screen individuals or businesses. If you routinely screen tenants, consider joining Landlord2Landlord (L2L), founded by a landlord in 1994 to eliminate problem tenants and unpaid rent. They offer screening, forms, and so much more.

Follow the law

Watch what you say/do when assessing prospective tenants.

I recommend: Every Landlord's Guide to Finding Great Tenants (plus 40 useful forms on CD) is a must-have for any landlord – the e-book is $14.99, or the paperback $16.99 plus shipping. Go to L2L to learn what the FCRA means to you.

Conduct Patriot Act search

Under the USA Patriot Act, the Office of Foreign Assets Control (OFAC), a government watch-list/database of terrorists/criminals around the world, was created. This law requires landlords to conduct the OFAC Patriot Act search on individuals (by name) and businesses (by biz name).

I recommend: Go to OFAC-IQ to search for people/companies with whom you should never conduct business.

Tips & Tactics
Helpful advice for making the most of this Guide

Be proactive, not reactive: Getting a bad tenant evicted in a long, costly process.
In most states, you can legally charge the applicant an application fee to cover the costs of screening – check with your state laws for specifics.
Require income proof through tax returns, bank statements, and paycheck stubs.
Keep written records of all correspondence with credit agencies, screening firms and tenants.
Federal law prohibits housing discrimination based on race, color, national origin, religion, sex, familial status and physical/mental disability. Some states have additional anti-discrimination laws.
The FCRA requires you to notify both commercial and residential applicants in writing if any information in their credit reports led you to deny renting them property or to request additional security deposits.

The official source of Tenant Screening is the Tenant Screening page at Business.com

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