Tennessee Background Checks

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Tennessee 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: 

    • 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

Tennessee Background Checks

Landlords in Tennessee should run a background check on potential tenants as a precaution and general policy. Here are three reasons to run a Tennessee background check: 

  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. If a tenant lies on their rental application or submits fraudulent documents in TN, a credit check can uncover the truth before you allow the tenant to occupy your property and put you in a bad spot. 

  1. Avoid future evictions 

According to Evictions Lab data, there are about 168 eviction filings per day in TN. Evictions in Tennessee are long and expensive processes, often taking four to eight weeks and costing thousands of dollars, so you want to avoid them whenever possible. Additionally – because tenants with a previous eviction are more likely to be evicted again — understanding eviction history is essential for avoiding turnover. 

  1. Learn about the existence or nature of illegal activity 

It’s also important to run criminal background checks in Tennessee. In 2021, the recidivism rate in the state was near 50%, which is very high. While landlords cannot have a blanket policy for denying people with a criminal record, certain crimes (like sex offenses) restrict convicts from certain housing options and are valid reasons to deny a tenant. There can also be other criminal history-related reasons to deny an applicant, so checking criminal records matters.  

What do Background Checks in Tennessee Cost?

A Tennessee criminal background check is typically relatively affordable just like they are 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 like Tennessee typically costs between $10 and $30 per person (the TN Bureau of Investigation charges $29). 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 the different types of background checks in this article on the topic. 

Which Laws Apply to Tennessee Background Checks?

Tennessee background checks cannot be used by anyone for any purpose. Due to fair housing protections, the use of credit reports and criminal background checks is restricted. A background check TN considers compliant must adhere to federal and state background check laws. 

The Fair Credit Reporting Act 

The FCRA is a critical federal law from the federal government related to background checks. The FCRA protects consumer privacy, ensures fairness and accuracy of information obtained and divulged by consumer reporting agencies, and dictates how employers can use information from pre-employment background checks. 

Title VII of the Civil Rights Act of 1964  

This Act prohibits employment discrimination against job applicants and employees in protected groups. It also applies to people whose background checks show criminal convictions in the sense that employers need to individually determine if the criminal conviction directly impacts the specific role they applied for. 

Employment Background Check Laws 

As of 2020, Tennessee enacted a statewide “ban-the-box” law (Senate Bill 2440) for public sector jobs (this doesn’t extend to private employers), making it one of many “ban-the-box” states in the U.S. According to TN’s law, most public Tennessee employers cannot conduct pre-employment background checks or ask about criminal history during the early states or on job applications. Instead, Tennessee state employers must wait until the candidate is offered an interview (or conditional offer of employment, if there is no interview) to ask about convictions and/or run employment background checks that include criminal histories. 

 

Adverse Actions 

If you decide to deny an applicant, it’s critical to know rules and regulations regarding rejecting potential renters. Read this article to review legal reasons for denial and how to abide by the Fair Housing Act. If you deny an applicant based on information in consumer reports, you’ll need to send them an “adverse action” notice. Read more about these notices here. 

 

Know Tennessee Background Check Laws 

Before you run a background check in Tennessee, be sure you’re aware of the state and federal laws that apply to their use. Keep in mind that while all Tennessee counties are subject to state-wide laws and executive orders, some counties may enforce additional regulations. Additionally, you must get written consent from a tenant before running a background check. 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 Tennessee 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 state or local level.  

 

Tennessee doesn’t have any notable additional “lookback” limitations at the state level. 

How to Run Background Checks in Tennessee?

When you need to conduct background checks in Tennessee, most people either conduct a DIY background check or use a third-party provider. If you run a DIY background check, you’ll obtain criminal history from the Tennessee Bureau of Investigation, 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 extremely risky, though, because it’s easier to run afoul of relevant laws inadvertently (unless you’re very well-versed in the law).  

For expediency and the peace of mind that you’re working with a company abiding by laws, a better option for most landlords is hiring 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 and reporting 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.