Simple, Effective Screening for Better Tenants in Alabama

Alabama Background Checks

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 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?

1. Credit Report: Aside from a lease agreement, a tenant credit 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
   • Winter weather damage

   The credit score and the resident score are key. 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 ave 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’s helpful).

2. Criminal History: Wide-sweeping national databases, more narrow specific state databases, and granular county records are the main elements of most criminal history reports.
3. Income Verification: There are several ways to verify income. Let’s look at some of the most common here: whether someone will pay on time and in full. Here are the main components of a credit report:
   • 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

4. 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.
5. 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:
   • 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. Tenant screening or employment background checks 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: 

1. • 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

Alabama Background Checks

Landlords in the Yellowhammer state should run an Alabama background check on potential tenants as a precaution and general policy. Here are three reasons to run background checks in Alabama:  

• Identify rental application fraud  

Rental application fraud, which occurs when a tenant lies on their application or submits fraudulent pay stubs and bank statements, is increasing across the country. The 2022 Snappt State of Apartment Tenant Screening Survey showed that 85% of managers felt applicants were growing more comfortable committing fraud. Thus, the importance of fraud detection is only getting more crucial for rental businesses. Running an Alabama background check can help you detect fake documents and inconsistent information before the tenant moves into the property, which increases the odds you’ll avoid an expensive eviction later.  

• Avoid future evictions  

The average filing fee in Alabama to start the eviction process is $276. In Mississippi, the same fee is only $65. Alabama’s eviction filing rate in 2018 was 3.8% compared to Mississippi’s 14.7%. And the average filing fee across all states in America is $109. Thus, Alabama is a state where it particularly behooves landlords to do a thorough Alabama background check to find better tenants.   

• Learn about the existence or nature of illegal activity  

It’s also critical to run criminal background checks in Alabama. Alabama has a sizable reentry population, with about 13,000 people released from prison every year and 285,000 from jail. Landlords cannot have a blanket policy for denying people with a criminal record, but specific offenses (e.g., criminals on the sex offender registry) minimize housing options and can be legitimate reasons to deny an applicant. 

What do Background Checks in Alabama Cost?

Background checks are fairly affordable across the U.S., but a background check cost can 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 like Alabama costs between $10 and $25 per person (e.g., a criminal background check through the Alabama Law Enforcement Agency costs $25 per report). County records, which tend to be more accurate and up to date, cost $16-$25 per person per county checked. You can dig deeper into each of these specific types of background checks in our article on the topic.  

Which Laws Apply to Alabama Background Checks?

An Alabama background check cannot be used by anyone for any purpose. Due to fair housing protections, the use of credit reports and criminal background checks is restricted.   

Landlords in Alabama must be careful when considering an applicant’s criminal history. Your policies must be consistent and nondiscriminatory. You can only deny applicants if their past criminal offenses are directly related to the application. The exception to this rule is the manufacture or distribution of illegal drugs. If an applicant has a criminal history record of this nature when you review a criminal background check, you can deny their tenancy. 

Keep in mind that tenants must provide written consent to a background check Alabama considers compliant before you proceed with conducting background checks. 

The Redeemer Act is something Alabama put in place to help people with certain convictions get a fresh start. It lets people with nonviolent misdemeanor convictions, traffic violations, and municipal ordinance offenses apply for expungement. This law helps people get cases removed from public records if they’re approved (the records can still be used exclusively for investigative or law enforcement purposes).   

When it comes to Alabama employers, Alabama isn’t a “ban the box” state. This means that Alabama employers’ right to ask questions about criminal history or require an applicant to undergo a criminal background check on their initial job application vary by county. Conduct further research specific to your county if you want to learn more on this topic.  

Before you run a background check in Alabama, be sure you’re aware of the state and federal laws that apply to their use. Keep in mind that while all Alabama counties are subject to state-wide laws and executive orders, some counties may enforce additional regulations. Be sure you’re educated on the law in your region and adhere to the HUD’s recommendations.  

How far back do Background Checks in Alabama go?

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 local level. 

An Alabama criminal records check can go back indefinitely regarding criminal convictions, although any relevant restrictions of the FCRA must still be respected. Most non-conviction records only go back seven years. 

How to Run Background Checks in Alabama?

There isn’t one uniform Alabama background check system (i.e., one method on how to get a background check in Alabama). That said, it’s typically best to use a third-party provider.  

However, you can run an Oregon background check yourself. If you run a DIY background check, your best bet is to fill out a criminal history request form to get criminal history records, 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 very risky, though, because it’s much easier to run afoul of laws inadvertently (unless you’re extremely well-versed in the law). They can also be extremely time-consuming. 

The better option is to run your Alabama state background check with a third-party provider, who often bundle credit, resident, criminal history databases, 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 TransUnion SmartMove 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.