Simple, Effective Screening for Better Tenants in Indiana

Background checks are a vital part of thorough tenant screening. Every landlord needs to know the history of every applicant. Background checks give you a good idea of whether someone makes payment on time, stays out of massive debt, has a criminal past, and a lot more.

Background checks also reduce the chances of tenant turnover, protect you from liability, and help you and other tenants remain safe.

In this article, we’ll help you understand what background checks consist of, how to ensure you get the information you need, and what you need to know about your state’s rules regarding them.

What are Background Checks? 

Background checks typically consist of a credit report, criminal history, income verification, eviction history, and a rental application. 

Credit Report

Aside from a lease agreement, a tenant credit report might be the most crucial document for a landlord to understand. This document is one of the best ways to determine whether someone will pay on time and in full. Here are the main components of a credit report: 

• • Basic information like former names/aliases, current and previous addresses, etc. 
  • Fraud indicators like invalid phone numbers or phony social security numbers 
  • Tradeline summaries that give a snapshot of an applicant’s active accounts  
  • Inquiries that show a list of companies who viewed an applicant’s credit file over the last two years 
  • Credit/resident score 

A credit score is a numerical value anywhere from 300-850 that helps illuminate an applicant’s creditworthiness. If an applicant has a score of 500 or less, proceed with caution. Most reliable tenants will have a score above 560. 

A resident score is similar to a credit score, but more directly reflects someone’s reliability as a tenant. Both scores are proprietary, so the exact formulas aren’t available to the public. That said, resident scores typically include a recommendation on whether to accept an applicant or not (this shouldn’t be treated as gospel obviously, but it can be helpful).  

Criminal History

Wide-sweeping national databases, more narrow specific state databases, and granular county records are the main elements of most criminal history reports. 

Income Verification

There are several ways to verify income. Let’s look at some of the most common here:  

• • Pay Stubs: Paychecks are the most common way to verify income. Anyone with full-time or part-time employment can make copies of paychecks and send them to you. 
  • Yearly Tax Returns: A federal tax return is another option to obtain proof of income. This is often an excellent option because it’s an official legal document, so it’s difficult to fake. 
  • W-2 Tax Form: These forms show employer’s withholding payroll taxes from workers’ earnings. This is another good option because it’s a document directly from an employer. 
  • Bank Statements: This method is especially effective for self-employed applicants because they won’t have regular pay stubs like those who work for traditional businesses. 

Important Note: Innago’s new income verification feature, which you can learn more about here, makes it easier than ever to ensure your tenants have the necessary funds to pay you. 

Eviction History

Except in cases where overdue rent went to collections or a previous landlord reports late payments, credit reports don’t usually show evictions.  

Federal law typically prevents evictions from being shown on a background check after seven years, but this figure varies by state. 

If you cannot see an applicant’s eviction history on a credit report or obtain the information by contacting their previous landlords, then you may pull an eviction report. However, certain states have restrictions on different kinds of reports (we’ll address those if they’re relevant later in this piece).  

Eviction history matters because the cost of an eviction for landlords is often between $4,000 and $7,000 or more. That means that if a tenant was evicted, they likely left their previous landlord with no other choice. 

Application

A rental application is a preliminary form used to obtain basic information about an applicant and their eligibility. Most applications ask for this information:  

• • Basic Contact Information: Think entire legal name, cell phone number, email address, etc. 
  • Current and Former Renting Experience: Four to five years back is typically plenty. 
  • Landlord References: Contact previous landlords and get their take on applicants. This is a critical step that some landlords skip over. Make sure you’re not one of those landlords. 
  • Employment History: You want to know current and former employers and get consent to contact them. 
  • Written Permission to Run a Credit Check 
  • Legal Disclosures: Here’s a helpful article on what disclosures to include. 
  • Additional Inquiries: Be careful here. Make sure you don’t ask questions that violate laws. Only ask about things like pets or smoking. And make sure you’re consistent. 

Why Do You Need to Run Background Checks? 

Background checks in general are utilized by a variety of groups: landlords, employers, lenders, licensing agencies, government agencies, etc. They are run to ensure that a candidate for a job, license, property, or loan is properly qualified and does not have a history of behavior that would interfere with their ability to perform the duties required under contract. Background checks minimize legal liability, protect companies’ assets and current employees, and are sometimes required by clients.  

When it comes to landlords, background checks are needed to: 

• Protect the safety and property of other tenants 

• Reduce tenant turnover 

• Minimize legal liability 

• Increase the likelihood of on-time rental payments 

• Avoid conflict and crime in the rental community 

• Narrow down applicants for a high-demand property 

• Prevent expensive and lengthy eviction processes 

Indiana Background Checks 

Landlords in the “Hoosier State” should run background checks on potential tenants as a precaution and general policy. Here are three reasons to run background checks in Indiana: 

1. Identify rental application fraud 

Rental application fraud, which occurs when a tenant lies on their application or submits falsified pay stubs, bank statements, etc., is on the rise across the country. According to recent data from Snappt, 85% of landlords and property managers report having experienced rental fraud in 2020. If a tenant lies on their rental application or submits fraudulent documents in Indiana, a credit check can uncover the truth before you allow the tenant to occupy your property. 

2. Avoid future evictions 

Running a tenant’s eviction history in Indiana can also help you avoid evictions for nonpayment or criminal activity. According to recent data from the Eviction Lab, Indiana had 72,810 eviction filings in the last 12 months, equating to about 9% of Indiana’s renters. 

Eviction in Indiana is a long and expensive process, taking anywhere from three weeks to four months. Because tenants with a previous eviction are more likely to be evicted again, running an eviction history is essential component of an Indiana background check and can help you avoid high turnover. 

3. Learn about the existence or nature of illegal activity 

It’s also important to run an Indiana criminal background check. Indiana has a fairly large criminal reentry population, with 254,470 releases from prisons and jails in 2019, the 14th largest in the U.S. While landlords cannot have a blanket policy for denying convicts, certain crimes (like sex offenses) that show up on Indiana criminal records restrict convicts from certain housing options and are valid reasons to deny a tenant. 

What do Criminal Background Checks in Indiana Cost? 

Background checks are relatively affordable across the U.S., but their costs vary depending on the area searched and the level of information requested. Searching national records typically costs between $13-60 per person, while searching an individual state’s records costs between $10 and $25 per person. The Indiana State Police offers state criminal background checks for $15 per name ran. County records, which tend to be more accurate and up to date, cost $16-$25 per person per county checked. You can learn more about each of these specific types of background checks in our article on the topic. 

Which Laws Apply to Indiana Background Checks? 

An Indiana background check cannot be used by anyone for any purpose. Due to fair housing protections, the use of credit reports and criminal background checks in Indiana is restricted by several laws. A background check Indiana considers compliant must adhere to the following state laws in addition to federal ones like the Fair Credit Reporting Act (FCRA). 

According to Indiana Code Title 10, employers can request a “limited criminal history” from the Indiana State Police (note that third party background check providers cannot provide limited criminal history reports). A limited criminal history contains only felonies and class A misdemeanor arrests within the state of Indiana. 

Indiana law further restricts which criminal records can be reported by providers. Indiana Code 24-4-18 designates that criminal history providers (defined in the Illinois Code) cannot release records that have been expunged or restricted from public disclosure/access by a court. This law also prohibits the release of certain convictions (Class D or Level 6) that have been entered or converted to Class A misdemeanor convictions. 

Lastly, Senate Bill 312 – the first of its kind in the U.S. – is enforced by the state of Illinois and forbids local governments (counties, cities, etc.) from passing ban-the-box laws that are more restrictive than Illinois state law or federal law. This means Indiana employers don’t need to keep track of many local laws but can instead ensure they’re compliant with the state standards for using criminal history information. 

Adverse Actions 

If you decide to deny an applicant based on information from their consumer report, it’s critical to know rules and regulations regarding adverse actions. Read this article to review legal reasons for denying a tenant and how to abide by the Fair Housing Act. If you deny a tenant based on information in consumer reports including Indiana criminal background checks, you’ll need to send them an “adverse action” notice. Read more about these notices here. 

Know Indiana Background Check Laws 

Before you run a background check in Indiana, be sure you’re aware of the state and federal laws that apply to their use (there may be exceptions for certain employers, like law enforcement agencies). Additionally, you must get written consent from an applicant before running a background check. Be sure you’re educated on the law in your region and adhere to the HUD’s recommendations if criminal background checks are part of your tenant screening process. 

How Far Back Does a Background Check Go in Indiana? 

When you use consumer reports to make tenant decisions, you must comply with the Fair Credit Reporting Act (FCRA). 

Section § 605 – 15 U.S.C. § 1681c of The Fair Credit Reporting Act (FCRA) applies in all 50 states and mandates a seven-year restriction on reporting certain background check information like civil suits, civil judgments, and arrest records (except in certain cases where an employer is hiring for a job with a salary more than $75,000). The FCRA doesn’t have similar timeline restrictions on criminal convictions, but some states restrict reporting conviction information at the state or local level. There are no notable state laws to this nature in Indiana, but individual cities or counties may have additional restrictions. 

How to Run Background Checks in Indiana 

When you need to conduct background checks in Indiana, most people either conduct a DIY background check or use a third-party provider. If you run a DIY background check, your best bet is probably to request criminal history from the Indiana State Police, contact an applicant’s former landlords and employers, obtain a credit report (Equifax, Experian, and TransUnion are the three major credit reporting agencies that compile credit information), verify income, look at the sex offender registry, and ensure you have all the information you need to conduct thorough tenant screening. DIY checks can be risky, though, because it’s easier to run afoul or relevant laws inadvertently (unless you’re very well-versed in the law).  

The better option for running a background check is to partner with a third-party provider, who often bundle credit, resident, criminal, and eviction histories together as a package. You can select the kind of reporting you need and let the third-party take care of the collection process. 

Background Checks with Innago 

At Innago, we’ve partnered with Experian to help you review background check information and identify high quality applicants. Running a background check through Innago allows you to quickly and easily identify the best applicants and ensure their application information is accurate. Likewise, Innago’s income verification feature helps our users verify reported income by connecting to their bank account, payroll provider, or by uploading documents. 

Disclaimer: This article is for educational purposes only and does not constitute legal advice. We recommend you consult with professional counsel if you have legal questions regarding your specific practices and compliance with relevant laws.