Although tenant background screening can be a tricky subject, your best bet is to have prospective tenants fill out a written rental application that includes, at a minimum, the tenant's:
You should contact the tenant's past landlords and other references to see if there have been problems in the past. Also, verify the financial information provided by the tenant and run a credit report to assist in verifying the information provided to you.
The most important tool in tenant background screening is the credit report. To begin a credit check, you need the tenant's name, address and Social Security number. If a tenant does not have a Social Security number, you can also use the tenant's Individual Taxpayer Identification Number (ITIN) provided by the IRS. The big three credit bureaus are Equifax, Experian and TransUnion. You can find information on running reports with these three bureaus by visiting their respective websites (Equifax.com, Experian.com, TransUnion.com) or in the Yellow Pages of your local telephone book.
No, you don't have to, but it is extremely risky to rely on any oral agreement. Unless you have a really, really good reason, you should always use written rental applications. If nothing else, written applications contain information to help you justify why you turned down a particular tenant during the tenant background screening process.
If a rejected tenant sues you, it's relatively easy to deal with the lawsuit if everything is in writing. You can provide the other tenants' applications, and explain why you chose the other applications. Courts are not in the business of being landlords, and as long as you provide a reasonable, non-discriminatory basis for choosing one tenant over another, a judge is very unlikely to overturn that decision. On the other hand, if you have no documentation to support your decision, it becomes a "he said she said" contest. You want to avoid this at all costs, because courts look more favorably on tenants with no records than landlords who don't keep records.
Federal and state fair housing laws regulate the tenant background screening process and prohibit a landlord from refusing to rent to a tenant because of the tenant's race, religion, disability, sex, ethnicity, or because a tenant has children. Some state laws also prohibit discrimination based on age, marital status or sexual orientation.
In particular, the Federal Fair Housing Act also prevents landlords from:
Landlords only have to make reasonable, business-related judgments when selecting tenants. Reasonable minds can disagree over which tenant is best, so you don't have to fear being successfully sued for selecting one similarly qualified tenant over another as long as you have a legitimate business reason for your selection.
For example, valid reasons to reject a tenant include poor credit history, insufficient income and prior misconduct. As long as you can justify the decision as a business decision, you have nothing to fear. The only note of caution here is that you must apply these standards equally, or your otherwise valid-seeming justification might not hold up in court.