Credit/Background check for renters?

[CanyonMan]

Hi all,

I've been asked to step in and assist (key word here, not "manage") with a handful of rental units on an owner-occupied property in San Diego. After a recent bad tenant issue that required major Law Enforcement intervention my elderly family members have accepted that a background/credit check should be implemented for all new tenants.

Anyone have recommendations for a background/credit/rental history service? At a minimum we need a criminal and credit check, ideally that we can charge tenants for under an application fee. The rental units are on a property are in a crappy part of town, so some criminal history and mediocre credit are to be expected, but finding out that the applicant is a convicted murderer with a half dozen evictions might be a nice heads up.

All I've looked at so far is the San Diego County Apartment Association (www.sdcaa.com), who appear to offer background services as well as assorted other info and documents that a landlord is likely to need.

Does anyone use background check services, and have a recommendation?


Also, I guess I'll throw out that if there are any San Diegan Mustachians looking for a place to rent there will be a 1bdrm small rental house available once we finish cleaning it up. It's in a rougher neighborhood, but is close to public transport, and has a great space in that yard that needs some TLC to become amazing. PM me for details if interested. If we could find a great tenant to help keep the property in line we may be able to work something out.

[D.williams]

That bad tenant situation sounds awful, hope it turned out best it could. This is why I am such a big fan of tenant background checks and using the services that are out there, along with me meeting the possible tenant and getting my own feel. I have been using MyRental.com for a while now and intend to continue using them in the future.

They offer most reports you would want to run, including criminal background checks which you can find here (http://myrental.com/criminal-search/). Aside from that, they offer most of their reports as "stand-alone", so if all you wanted to check was a criminal background report, you would be able to do so and not need to purchase the entire package.

Overall, a very reliable and thorough service.

Good luck!

[CanyonMan]

Thanks. Their prices look a bit better than the SDCAA price list.

[richschmidt]

I've always used TransUnion's MySmartMove.com, ever since learning about it over on biggerpockets.com.  It lets you choose to have the tenant pay them directly, or you can pay it. $30, I think, for both credit and criminal checks.

[Lorin]

I've always used TransUnion's MySmartMove.com, ever since learning about it over on biggerpockets.com.  It lets you choose to have the tenant pay them directly, or you can pay it. $30, I think, for both credit and criminal checks.

This is what we use, too. It's nice because the applicant pays them directly.

[CanyonMan]

Thanks.

Do you find the application cost keeps crummy tenants from even bothering to apply?

[Lorin]

Thanks.

Do you find the application cost keeps crummy tenants from even bothering to apply?

I'm not sure it weeds out crummy renters but it does help keep it to serious applicants only.

[D.williams]

Thanks.

Do you find the application cost keeps crummy tenants from even bothering to apply?

I'm not sure it weeds out crummy renters but it does help keep it to serious applicants only.

I don't think it will fully weed out sub par tenants, but I do think it will help to eliminate some of them.

[CanyonMan]

Thanks.

Do you find the application cost keeps crummy tenants from even bothering to apply?

I'm not sure it weeds out crummy renters but it does help keep it to serious applicants only.

Different wording, same idea :P

That property seems to attract a ton of applicants who have no real income source. Hopefully throwing an application fee in there will keep them from wasting our time with junk applications.

[CanyonMan]

Thanks.

Do you find the application cost keeps crummy tenants from even bothering to apply?

I'm not sure it weeds out crummy renters but it does help keep it to serious applicants only.

That's the hope. Reference checks and interviews will hopefully help us find the diamond in the rough tenants, but anything I can do that cuts down the crummy applicants that we have to process manually will be a big help.

I don't think it will fully weed out sub par tenants, but I do think it will help to eliminate some of them.

[Angie55]

I hate to jack your thread but,

Would this be a good service for tenants to use on their landlords? After a horrible short sale and stolen deposit, I would love to have a credit check on my landlords prior to signing a lease. I know it seems out of the ordinary and most landlords would not agree to it. But I would  even pay to do it if I had the option.

[SDREMNGR]

You'd be surprised but people do apply and lie on it.  Make sure to check addresses and pay stubs.  I've had people submit faked paystubs.  Look for gaps in addresses that don't match what the report says.  Also go with gut feelings (outside of discrimination). 

@Angie55.  If my tenants asked for that, I'd tell them that I'd think about it and get back to them and then toss that application in the trash.  I don't think anyone is going to entertain that imo.

[taekvideo]

I used rentprep for my 3 tenants, seemed to work fine.... matched the histories they told me.

[arebelspy]

I use MySmartMove as well - if you go through BiggerPockets (or go directly to https://biggerpockets.mysmartmove.com/) you get a $5 discount on it ($25 instead of $30, IIRC).

Only downside is when the tenants don't have an email address.

[Paul der Krake]

Only downside is when the tenants don't have an email address.

In your experience/rental stock, how often does this happen?

[arebelspy]

Only downside is when the tenants don't have an email address.

In your experience/rental stock, how often does this happen?

Not super common, but sometimes with Section 8 tenants.

[supomglol]

I use the services included with Cozy.co.  Makes me feel good to give them some business since I otherwise take them for granted enjoying free rent payment collection.

Also, this may sound harsh; but I don't consider tenants who don't have an e-mail address.  I conduct business exclusively by e-mail/text unless a certified letter is needed. While those individuals may be excellent tenants, they are not compatible with my business.   I accept that I may miss out on some good tenants with this policy. 

[powskier]

I have some excellent tenants who have zero credit and some that do not even have a bank. I am not sure if a credit check is that valuable unless of course it shows endless non payment of bills.
I always check the state court data base or any other state that they lived in. I ask them many questions over the phone before even showing them the place ( employment , income, debts, etc) I have found that by asking them early on the phone it is pretty easy to weed out folks. Always check all references, bosses, etc.
It seems to me that many folks who we rent to do not have any credit (our building is low income units), I am wondering if those of you who do check credit for lower incomes have actually found this tool useful? Is it more useful for moderate/higher income places?

[escolegrove]

We have 8 rental properties and I manage another 4 for family. Here is my link to cozy, which I personally use and LOVE cozy.co/reluctantlandlord. They have an online application, background and credit check. It has the option to bill the tenant (which I always take as I don't charge application fees). You still have to do the lease, pay stubs and license collection on your own (I don't do references long story ;) ) but this dramatically reduces the work. The bonus is they also allow your tenants to pay rent online. I don't do this option, as my tenants pay direct deposit. Its good option.

PS- We have gone through many different companies. While they aren't the cheapest option out there in regards to paying per screen. I love that all the costs are all covered by the tenant. I use to use Buildium which was great but at over 600 per year for the landlord it wasn't worth it to me. Even if it was only $15 per check for the tenant. 9 of the houses I manage are in central California  at a lower rent and we have not had an issue with tenants silliness to cover.

LET me know if I can help :) Good luck

[AlisR]

Hello CanyonMan,
What I can recommend and have been using for a long time as a landlord is http://www.e-renter.com/samples/background_credit_check I have not had any problems with tenants since then. The service provides various types of checks including the ones you are looking for. You can get reports very easily usually within one hour. There are no registration fees and you pay only for ordered reports. Keep in mind that the cheapest or free options are not good as you do not want to put a risk on your investment. Those services usually do not carry out the checks properly.
 I would also suggest offering references from your previous tenants or providing recent background check on yourself. It helps to build trustfulness. I also agree with the idea of meeting the possible rentals and getting your own feel. Even though it is quite time consuming I would strongly recommend doing so. Do not look just at the numbers of reports.  In case you need any help, let me know!
Good luck and have a nice day!

[FamVestor]

I agree with escolegrove, www.cozy.co is the way to go! We use it in our quad and it works beautiful. Created a listing through cozy.co and potential tenants applied online, we got to see their credit score and background check without even needing to ask for their SSN, and they pay for it on their end and get their own copy.

We also use cozy to receive online rental payments from those same tenants that we accepted through  cozy.co , so it makes it all a seemless process. and its a compeltely free service; I think the tenants will only be charged a fee if they pay by credit card, but if they do ach bank transfer its free.

[richschmidt]

I've always used TransUnion's MySmartMove.com, ever since learning about it over on biggerpockets.com.  It lets you choose to have the tenant pay them directly, or you can pay it. $30, I think, for both credit and criminal checks.

I switched to cozy.co a couple years ago and have been happy with it. Totally free for me, tenant pays for their own background & credit checks. Just have to wait about a week for the rent to finally land in my checking account for those tenants who pay through cozy.co. I'm not going to pay extra for the rent to show up a couple days sooner. :)

[Ocinfo]

Have used mysmartmove.com but cozy.co certainly looks like what I'll be using in the future.


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[Seadog]

As someone potentially in the rental market, do you people not worry that by asking renters to supply background and credit checks you may be pushing away quality people who simply can't be bothered to jump through silly hoops by virtue of the fact that because they are high quality, they have options? I firmly believe home prices in Canada have detached from reality, and even though I could buy a house cash, renting is by far more prudent financially. At the same time, if I was asked to bear the cost of these checks, I would simply move on to something else because I feel if the landlord is the one with the concerns, they should bear the cost of satiating that worry. Similarly if I'm doubting the condition of a used car, I should bear the cost of a mechanics inspection. Also +1 on the landlord check, though not sure how far you'd get with it. I've also had a deposit more or less stolen before, and lived in a place where water was shut off multiple times because bill wasn't paid. 

[richschmidt]

As someone potentially in the rental market, do you people not worry that by asking renters to supply background and credit checks you may be pushing away quality people who simply can't be bothered to jump through silly hoops by virtue of the fact that because they are high quality, they have options? I firmly believe home prices in Canada have detached from reality, and even though I could buy a house cash, renting is by far more prudent financially. At the same time, if I was asked to bear the cost of these checks, I would simply move on to something else because I feel if the landlord is the one with the concerns, they should bear the cost of satiating that worry. Similarly if I'm doubting the condition of a used car, I should bear the cost of a mechanics inspection. Also +1 on the landlord check, though not sure how far you'd get with it. I've also had a deposit more or less stolen before, and lived in a place where water was shut off multiple times because bill wasn't paid.

If you don't want to pay application fees (which pay for those background/credit checks) and can find great places to rent that don't require them, more power to you! From what I've seen, they're pretty much standard, except in two cases: (1) newbie landlords who don't know to do those checks, or (2) landlords who specialize in renting to folks with terrible or no credit (like college students), so they don't bother. Though I suppose those who rent to college students often require a parent to cosign the lease... but that's a different conversation.

I like your used car analogy. The one who owns the car doesn't pay for the mechanic to check it out. The one who wants to buy it does. Likewise, the one who owns the rental unit doesn't pay for the background/credit checks/application fee. The one who wants to rent it does.

So to answer your question: No, I'm not worried. I may miss some quality tenants, but I'll also avoid some terrible ones. I'm OK with that. I only have 5-10 years of experience as a landlord, with 5 units currently... and I'm glad I do the checks.

[jviska89]

As someone potentially in the rental market, do you people not worry that by asking renters to supply background and credit checks you may be pushing away quality people who simply can't be bothered to jump through silly hoops by virtue of the fact that because they are high quality, they have options?

I'm in the US if that makes any difference. We just got our first rental and have not needed the background checks yet. Our plan is to charge applicants the background check fee using cozy.co. If they qualify and sign a lease the cost of the check will be discounted in firsts month's rent as many places locally do not charge for background checks. As a prior renter the fee did two things, it made me make sure I was actually interested and it discouraged applicants who wouldn't meet the qualifications. In other words I better be serious about wanting to live there and I knew my neighbors would meet the same standards as me.

If you are in a hot market not off loading the cost is silly business wise and increases your workload by processing a bunch of unqualified tenants.

[NoNonsenseLandlord]

You will need to decide what acceptable criteria is, before you run a background check.

You should know that 95% of inquires will be by sub-par tenants, even though only ~25%  are actually bad tenants.

You should know that increasing rent only drives out quality tenants, it does not attract them.

[Seadog]

If you don't want to pay application fees (which pay for those background/credit checks) and can find great places to rent that don't require them, more power to you! From what I've seen, they're pretty much standard, except in two cases: (1) newbie landlords who don't know to do those checks, or (2) landlords who specialize in renting to folks with terrible or no credit (like college students), so they don't bother. Though I suppose those who rent to college students often require a parent to cosign the lease... but that's a different conversation.

I like your used car analogy. The one who owns the car doesn't pay for the mechanic to check it out. The one who wants to buy it does. Likewise, the one who owns the rental unit doesn't pay for the background/credit checks/application fee. The one who wants to rent it does.

So to answer your question: No, I'm not worried. I may miss some quality tenants, but I'll also avoid some terrible ones. I'm OK with that. I only have 5-10 years of experience as a landlord, with 5 units currently... and I'm glad I do the checks.

Not sure I agree with your "owners" model. Contrast that with banks and mortgages. Despite the house owner "owning" the house, they still have to foot mortgage insurance, despite the bank being the beneficiary. In this case I feel if the bank is doubting the people's ability to repay the debt, they should bear the burden of the cost. I've had companies request driving abstracts or even want to drive with me for a bit before driving company vehicles. Again the company, despite owning the vehicles covered these costs.

You are correct in that when I lived in Texas I noticed application fees were more the rule than the exception, In Canada very few places have an "application fee", and it's a minority ask for a credit/background check. When I lived in Indonesia on the the other hand, the going rule was two years leases and the lump sum rent upfront.

The bottom line is that the best tenants, borrowers, employees, whatever get the best terms, and generally the reliability these people offer more than offset those better terms for whomever's on the other end. Companies or people with AAA credit ratings aren't going to the payday loan shop on the corner and paying 75% interest.

At the end of the day, I suppose it is simply what the market will bear. So things like background checks or having to come up with $75k upfront or committing to a 5 year lease are really just additional costs/hassles to the renter, so to say I'd simply move on is an exaggeration, but the rent would have to be below market enough to more than make up for it.