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Behind the Rental Application: How Landlords Use Your Credit Report to Decide Whether to Rent to You
In today's rental market, applicants face a series of challenges and requirements, and one of the most important is tenant screening. Landlords and real estate agents use the tenant screening process to assess potential tenants' ability to comply with the terms of the lease and their willingness to maintain the property. Based on past data, a good credit report is crucial to your chances of getting approved for a rental.
Tenant screening is important because it helps landlords filter potential tenants, reduce risk, and ensure their property does not suffer damage.
Tenant Screening Process
The tenant screening process typically begins with potential tenants (each adult applicant) submitting a rental application and paying an application fee. Rental applications collect a lot of personally identifiable information, such as name, Social Security number, date of birth, and ask for address, employment status, and any criminal or eviction records. In addition, applicants are generally required to sign to confirm the accuracy of the information provided and authorize the acquisition of a tenant screening report.
In order to comply with the Federal Trade Commission's identity theft red flags regulations, a valid government-issued photo ID is generally required to confirm the applicant's identity. Most landlords rely on tenant screening reports from tenant screening companies, which compile relevant credit, public record and other information needed to fully vet potential tenants.
Tenant Screening Companies
Tenant screening services are specialized consumer reporting agencies, as defined and regulated under the Fair Credit Reporting Act (FCRA). These agencies are subject to a range of obligations, including confirming the identity of each end-user (such as a landlord) and the purpose of their enquiry before providing a tenant screening report.
These agencies must ensure the utmost accuracy of the information in their reports and, upon consumer request, clearly and accurately disclose all information in their files. Failure to comply with these regulations may result in specific regulatory actions.
Contents of the Tenant Screening Report
Tenant screening reports typically include the following elements:
- Consumer credit report (may or may not include a credit score)
- Eviction Record Search
- Criminal Record Search
- Sex Offender Registry Lookup
- Specially Designated Country Searches (commonly referred to as OFAC Searches)
- Housing Reference
- Work Verification
- Recommendations based on the landlord's criteria
Credit report and database searches usually return results instantly, while in-depth searches of public records and employment verifications may take anywhere from a few hours to a few days.
Landlord's responsibilities
Under the FCRA, landlords must comply with certain requirements as users of consumer reports. Importantly, if there is negative information on the tenant screening report, the landlord must provide oral or written notice, which must include the following information:
- Name, address and contact number of the company that provided the tenant screening report
- Consumers have the right to receive a free copy of the tenant screening report
- Consumers have the right to contest the accuracy and completeness of information
Under the Dodd-Frank Wall Street Reform and Consumer Protection Act, landlords are also required to provide tenants' credit scores and other details when they take adverse action against them.
Tenant Screening and the Law
To protect consumers' legitimate rights and interests, many laws regulate consumer reporting, including the FCRA and its amendments in 2003 and 2010. State laws also often have many regulations on consumer reporting, especially in the tenant screening process, and clearly define what landlords can and cannot do and what fees they will charge.
Legal and legislative trends
Fair housing advocates have long argued that tenant screening for certain protected groups should avoid the risk of unequal impact and legal scrutiny. These issues were clarified in a 2015 Supreme Court decision involving the Texas Department of Housing and Community Affairs, which recognized the influence of administrative agencies in the housing role. Although landlords have the right to reasonably screen tenants based on their backgrounds, how to protect equal treatment for every potential tenant while seeking safety is a question worth pondering.
In such an environment, can landlords ensure that social equity and justice are not affected while meeting their needs? Is this a question that every participant needs to think about together?
