Credit - Background Checks

[S T]

I am sure this is an odd question, but thought someone might know.

Is there a good resource for Credit and/or Background Checks for a Small Business and possibly the Personal side of the Small Business Owner???

Has anyone on the Board used such a service?

A Client has requested this information - fr Commercial Rentals/Lease??

Thanks

Sandy

[Koss]

Credit Reports

Let's make sure I understand your question.

It sounds like your client is seeking to obtain credit reports for a business entity, and for the individual who owns the business, and also obtain a background check on both the business and the individual owner.

You said that your client requested this in connection with "commercial rentals/lease."

To answer your question, I am going to assume that your client is a landlord.

I work closely with a real estate management agency, and we have a lot of experience in this area.

We use a service called CTS/Interquest, and their rates are very reasonable.

A few words of caution:

I hope your client, the landlord, is a business entity, with a federal tax ID number. If it is a sole prop, I hope they have a registered trade name, or fictitious name, or "doing business as" registration with the state. CTS/Interquest doesn't like to do business with landlords who are individuals. It's not impossible, but it is very difficult.

Federal laws place very severe restrictions on who can obtain credit reports, and what they can be used for. Obtaining a credit report for the purpose of evaluating a prospective tenant is perfectly legitimate. But all companies that provide credit reports have become very wary of doing business with individuals.

Providers of credit reports conduct a basic review and evaluation of the person or business that is seeking to obtain credit reports before they will even establish an account. The real estate management agency that I work with had to jump through a lot of hoops:

We had to send copies of state documents showing the existence of the LLC.

We had to have the company listed in a telephone directory. It doesn't have to be a paper telephone directory. It can be a recognized online directory, such as yellowpages.com. These directories have their own requirements for verifying that the phone number you provide is really your number.

The company has to have an office. While it is possible to have an office in your home, the requirements are much tougher. In order to comply with federal regs, due diligence, and their contractual obligations with the three credit bureaus, CTS/Interquest really doesn't like to do business with companies that don't have a genuine office.

They sent a reviewer to the office to verify that it exists, and that the company's name is on the door. The reviewer conducted a very basic interview with one of the company's officers, and asked questions about how the company secures data. The end user of a credit report has an obligation to implement adequate security, to make sure that unauthorized parties don't get access to the data. They want to see that you have a shredder, and at least a locked filing cabinet. They will also ask if the office space is shared with another business. The answer can be yes, but you need to be able to credibly state that the other business will not be using, and will not have access to, the credit report data.

CTS/Interquest does business nationwide. The reviewer who came to the office was an independent contractor in our area. We are in Columbus, Ohio, but CTS/Interquest is in Cape Girardeau, Missouri.

They don't charge an annual fee for services. They charge for each credit report and background check. I think there was a one-time fee of $75 to establish the account, and that was actually to pay for the reviewer.

Also: They operate in a pretty old-fashioned way. Once the account is set up, your client will have to have the prospective tenant, or applicant, complete an application, by filling it out with a pen. (They sell them at Staples.) Then your client has to fax the application to Interquest. (Or I suppose you could send it by US mail).

At that point, they slowly move into the 21st century. They can send back the credit reports, and the results of the background checks, by fax or by e-mail.

My point is that you can't submit the credit application online. If your client is really sophisticated, they might be able to sit down with the prospective tenant and complete the application on a PC, using a fillable PDF or something. But it would still have to be printed, and signed with a handwritten signature, authorizing the release of the credit report. And then it has to be faxed to Interquest.

Interquest bills for their services monthly. The client doesn't have to pay at the time they request the credit report. I think they accept payment by credit card or by check.

Here's their website:

https://www.interqst.com

This is not a typo. The name of the company is Interquest. The website address is spelled differently; it's missing a couple vowels.

BMK

[S T]

Another Question

Burton, thanks as always for being on this Board and answering questions - Your expertise and knowledge and willingness to share is invaluable to the rest of us.

Moving one step forward on this post,

It is a Landlord of a small Commerical Rental that has approximate 6 -8 units and the Landlord is and reports as a Sole Proprietorship - Schedule E.

However, the Landlord does have a Property Manager in place for leases and Mgmt Fees and that Property Manager is an S Corp.

Is it possible that the Property Mgr sign up on the service you referenced? My client would be happy to have this information at his disposal and would be happy to re-imburse the Property Mgr for the cost to "screen" future tenants

Sandy

[Koss]

Property Management

Yes. The business entity that is providing property management services can become a client of Interquest. This is probably the appropriate way to do it if the property manager is the one who is interviewing prospective tenants, showing them the vacant units, and handing them the application to fill out.

If they do it this way, it means that the property management company--not the owner of the real estate--will have to satisfy the requirements of Interquest. The property management company could be managing various properties for dozens of different owners. But they only need one account with Interquest.

The one thing doesn't change is that the purpose of the credit reports and background checks is to evaluate prospective tenants. Even though the property management company is not the owner of the real estate, and probably is not a party to the lease, the management company can still screen tenants, in its capacity as an agent for the owner.

I can send you the forms we had to fill out in order to establish a relationship with Interquest. E-mail me if you want.

BMK

[S T]

Ty

Thank you Burton!
Email on its way!

Sandy

[joanmcq]

As a small landlord, I've gotten around the regs (they were stiffened up about 7 years ago) by having the prospective tenants run their own credit through annualcreditreport.com and bring me a copy. Not the best way of doing things, but I only have two units with turnover.