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Screening Tenants: What Landlords Need to Know

By: Real Estate Hotline
Spring 2024 (Vol. 42, No. 1)

As a landlord, property manager or other housing provider – you may choose to run a tenant background check using a company that compiles credit or background information. These services are helpful tools to aid landlords in choosing the best tenant. However, when you use consumer reports to make tenant decisions, you must comply with the Fair Credit Reporting Act (FCRA) which is enforced by the Federal Trade Commission.

Examples of these reports include:

  • A credit report from a credit bureau, such as Trans Union, Experian, and Equifax or an affiliated company;

  • A report from a tenant screening company that describes the applicant’s rental history based on reports from previous landlords or housing court records;

  • A report from a background check company that describes the applicant’s criminal history;

  • A report from a tenant screening company that describes the applicant’s rental history and criminal history, and also includes a credit report.

  • A risk score or recommendation from a tenant screening company about the applicant based on criteria you’ve selected; and

  • A report from a reference checking service that contacts previous landlords, employers, or other parties listed on the rental application on behalf of the rental property owner.

These key points will help you stay compliant with the FCRA:

  • Only get consumer reports for a permissible purpose such a new applicant or renewal. Get written authorization from all applicants before you pull a report.

  • Certify to the company from which you are getting the consumer report that you will use the report only for housing purposes. You may not use the consumer report for another purpose.

  • Review other applicable federal and state laws related to screening tenants in your area. For example, in some locations, refusing to rent to anyone with a criminal record may violate the Fair Housing Act.

  • If you reject an applicant, increase the rent or deposit, require a co-signer, or take any other adverse action based partly or completely on information in a consumer report, you must give the applicant or tenant a notice of that fact in writing, electronically, or orally.

An adverse action notice tells people about their rights to see information being reported about them and to dispute inaccurate information. The notice must include: the name, address, and phone number of the Credit Reporting Agency (CRA) that supplied the report; a statement that the CRA that supplied the report did not make the decision to take the unfavorable action and can’t give specific reasons for it; and a notice of the person’s right to dispute the accuracy or completeness of any information the CRA furnished, and to get a free report from the CRA if the person asks for it within 60 days.

The adverse action notice is required even if the information in the consumer report wasn’t the primary reason for the decision. Even if the information in the report played only a small part in the overall decision, you must notify the applicant or tenant.

While oral adverse action notices are allowed under the FCRA, written notices are the best practice and benefit both you and the applicant or tenant. Written notices allow you to provide proof of FCRA compliance. Written notices also better enable applicants and tenants to assert their rights to request a copy of the report from the CRA and to dispute any errors in the report.

If you use a credit score in deciding to take an adverse action against an applicant or tenant, you have additional obligations. You must give the applicant or tenant written or electronic notice that includes the credit score, a description of the score (its source, the date it was created, and the range of scores under that credit model), and the key factors that adversely affected the credit score, listed in the order of their importance based on their effect on the credit score.

According to the FTC, landlords who use “investigative reports” – reports based on personal interviews concerning a person’s character, general reputation, personal characteristics, and lifestyle – have additional obligations under the FCRA. These obligations include giving written notice that you may request or have requested an investigative consumer report and giving a statement that the person has a right to request additional disclosures and a summary of the scope and substance of the report.

Finally, when you are finished with a consumer report, you must securely dispose of the report and any information you gathered from it. That can include burning, pulverizing, or shredding paper documents and disposing of electronic information so that it can’t be read or reconstructed.

What Tenants Need to Know

When filling out an application with a tenant background check requirement, take the following steps to decrease the likelihood of errors and protect your rights:

  • Give the landlord your full name — first, middle (if you have one), and last — and date of birth. Fill out every section completely; this may include giving your Social Security number, prior addresses, and possibly other information as well.

  • Understand what the application fee is for. Is it a onetime fee for any home offered through this housing provider or are you applying specifically for this home? See if the home is still available before you pay the fee.

  • What a landlord is checking for may vary. If you expect some negative issues will show up, ask what the landlord is looking for before you pay the fee.

Under the Fair Credit Reporting Act, tenant background check companies cannot report most negative information — for example, most civil lawsuits and judgments, including housing court cases, and arrest records — after seven years. Bankruptcies can be reported for 10 years. However, there is no time limit for criminal convictions. Other laws, including the Fair Housing Act (FHA) and state or local laws, may have more restrictions on what tenant background check companies can report.

Under the Fair Credit Reporting Act, tenant background check companies are required to take reasonable steps to ensure the information in your report is accurate. Common errors may include:

  • Information that belongs to someone else.

  • Incomplete information, such as how civil or criminal cases or eviction actions were resolved.

  • Duplicate information, such as the same criminal record appearing more than once, suggesting they are separate cases.

  • Outdated information, such as information that is legally too old to be included in a background check criminal record or eviction information that was sealed or expunged.

  • If a landlord makes a negative decision about your application because of something a tenant background check company included in a report, review your rights under the FCRA. If you believe a background check company or landlord has violated your rights, contact a local fair housing organization, state attorney general, local legal aid or legal services office, or a local lawyer.

    You can complain to the Department of Housing and Urban Development’s (HUD) Office of Fair Housing and Equal Opportunity (FHEO) and submit a report to the Department of Justice (DOJ) if you think a landlord or tenant background check company illegally discriminated against you. You can also complain to the Federal Trade Commission (FTC) and the Consumer Financial Protection Bureau (CFPB), if you think a background check company included errors in your background check or if a landlord did not provide required information about the tenant background check company.