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Using background checks to screen tenants? Or maybe your company provides those background checks to landlords? Make sure you’re complying with the Fair Credit Reporting Act (FCRA). The FTC’s new guidance for landlords and for tenant background screening companies can help.

What do landlords need to know?

Landlords must take certain steps before getting a consumer report and after taking an adverse action based on the report. A consumer report can include a credit report, a rental history report or a criminal history report. Landlords can only get consumer reports if they have a “permissible purpose,” like tenant screening. Before you get a consumer report, you must certify to the company providing the report that you’ll use the report only for housing purposes.

If you, as a landlord, take an adverse action against a tenant or rental applicant, then you must give notice – orally, in writing or electronically. An adverse action could include denying a lease, requiring a co-signor, or requiring higher rent than for another applicant. The FTC’s guidance has more examples of when an adverse action notice is required. When you send an adverse action notice, it must include the contact information for the company who supplied the report and an explanation of the right to dispute the report.  

What should tenant background screening companies keep in mind?

Even if you don’t think of your company as a consumer reporting agency, it may be one if it provides information about people to landlords for use in housing decisions. Background screening reports provided by your company are covered by the FCRA if they’re used to help decide eligibility for housing and include information “bearing on a consumer’s creditworthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living.”

If your tenant background screening company is covered by the FCRA, then you have four main requirements:

  • Follow reasonable procedures to ensure accuracy.
  • Get certifications from your clients.
  • Provide your clients with information about the FCRA.
  • Honor the rights of applicants and tenants.

The new guidance includes details about each of these requirements, as well as a handy chart of key FCRA provisions.

Whether you’re a landlord or a screening company, when you’re done using a consumer report, you must securely dispose of it. For more information, read Disposing of Consumer Report Information? Rule Tells How.

Share these resources – and the FTC’s Credit Reporting and Human Resources portals – with others in your company.

 

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John Holt
November 28, 2016
I think that any background checks be limited to only housing history, a landlord only needs to see if the tenant has paid rent and is a good tenant, a landlord or property owner does not need to know any other history of the tenant as housing discrimination can occur and does occur. I have personally seen how too much information is not handled properly or the recipient of the information(landlord) does not have the experience to make a sound impartial judgement on the information provided. Information used for screenings are too often used to discriminate, this is why we value our privacy from the masses.
Marie
October 18, 2017

In reply to by John Holt

I am the manager of a manufactured home community. We do employment (or we check "other" sources of income), credit, criminal and past rental residence screening. I've found it to be helpful in every realm, depending on the applicant. The final decision is based on the applicant not having felony convictions, having "decent" credit (550 or higher) and having an acceptable rental history. The reason for all of that is to be sure they 1. Pay their bills, and have income that shows that they can continue to do so. - We don't expect perfection, we just need to see EFFORT. 2. We will consider someone on a case by case basis IF they have felony convictions from a long time ago but they haven't been in trouble since UNLESS the conviction was a sex crime, drug trafficking or worse. And lastly, I am SO GLAD I call the past landlords!! This alone has saved me from having riff-raff here! We are a very quiet, close knit community, & there have been a few landlords who have told me that they "evicted" the tenant, but it did not go to court, so THERE WAS NO RECORD OF IT. The last guy told me that the tenant moved his entire family in his little place, was a partier and he was breeding what we consider to be "dangerous breed" dogs. We advertise as a "crime free" community, so we have to have these guidelines in place.
KBL
October 12, 2018

In reply to by Marie

"crime free" community - wow - that screams lawsuit to me when something happen to either the resident or their guest.
DES
April 17, 2019

In reply to by KBL

I agree with KBL- Wow Lawsuit indeed - The rule of thumb is "Crime has no address"
Chriona
October 08, 2020

In reply to by Marie

Previous landlords can also have disdain for residents who are leaving their community and give false or exaggerated information. Someone should not be denied housing based on an opinion or, worse, grudge. Unless there’s a law or something demanding prudence against falsification. Even then, that rule would not stop a lot of people from lying about former residents who they just don’t like. Not to mention the millions of people whose credit and housing situations have been devastated by the pandemic. Leeway in renting decisions should be a given right now.
Lo
November 29, 2020

In reply to by Chriona

I agree with you, and since we were in a pandemic rented to a family without checks and checked their references and rental history with former landlord, what happened next is still in progress...the tenants moved 8 kids in instead of the 5 they said they had, after two months of payiing rent, said the mother lost her job and I'll have to wait before xmas which I'm very close to losing the home in jeopardy of my own generosity, I sincerely hope they didn't plan to keep me hanging until tax refund but it's not looking good for me, may have to put the home up for sale real fast and hope for the best God Bless
Ana
November 29, 2016
Screen your Land-Lord! he may very well be a Registered-Sex Offender.
Ida rivera
October 22, 2020

In reply to by Ana

Ftc giveing these slumlords too much freedom to dig into your privacy . Unfortunately we are living in a life we don't have anymore privacy . What's the use of trying to keep your social security number privacy??? When landlords that are crooket and slumlord will have the freedom to see every step to take or tooken in to our life. This is very unfair!!! Where's our privacy act ?????
Gearlean Parker
November 29, 2016
No one can stop the landlord's means of discovery. Rules don't seem to apply. I want to buy a house. But because of the twenty five credit checks I have no credit. I never checked my credit. But loan officers did and they said I have no score. I thank you for the information. All seemed to coincide with my phone being hacked during the election.
Homeowners Ass…
November 29, 2016
We are a homeowners association in North Lauderdale, Broward County Fl. We use consumer and investigation reports to determine eligibility of new unit owners and tenants. Presently we do not comply with the FCRA , adverse action notices. Requirements. Nor have we ever disclosed our minimum standards for eligibility to prospective applicants. Does this mean that we are in non compliance and may be subject to civil liability? Please help.
Robert Fain - …
December 02, 2016

In reply to by Homeowners Ass…

The short answer is yes, you are totally out of compliance and may be subject to fines, penalties and lawsuits.. The way you posed your question indicates you are well aware of that. If you are obtaining your consumer reports from a Consumer Reporting Agency, then I suggest you look for a new company which does a better job of keeping you informed on your legal responsibilities.
Dustin
December 02, 2016
Do you have link to the chart of FCRA provisions that you mentioned? Thanks.
Bella
December 06, 2016
If I want rent a one bed room apartment in NY queens landlord asked annual $ 60000.00 Income. This is totally unacceptable, if I have that much money I will bought a house.in future no one will not get a apartment .
Stella Reed
January 12, 2018
Why do landlords put a red flag on your name it show up on public records but it doesn't show up on your rental report? But you have section 8
Sharon Artt
January 17, 2018
How far back can a tenant screening company report criminal records in the State of Illinois
April E.
March 04, 2018
What if you were denied because of credit? What do you do about it? Can anyone please help?
Brendamccray66…
March 30, 2018
Rental agencies use all kinds of tactics to discrimate. Why go back 8 years and use that information to deny a potential applicant. All I see is out right discrimination.
fight4thepeople
May 12, 2018
I agree with John Holt. I have paid rent for the last decade and was never late, not once. The home was in my spouse name, and when we separated, I had a couple of negative things on my report, but not one negative rental account at all! never! I think it is a right for a property to know rental history, criminal history, and sex crimes. But there is NO reason, automobile, or credit cards, or other adverse history should be exposed to the property. First of all, many men with a few blemishes on their credit, are the providers in the family, taking care of not only their responsibilities, but of the kin folks, and others as well. In order to be accepted on the property, you had to score a 4.0, I scored a 3.5. It is just ridiculous that a person with perfect rental history, gets denied credit because some buy here pay here car lot has put a blemish on someones credit for 6 or 7 years, or some other bill, that has nothing to do with rental history. My elders told me, if you can not pay any other bill, pay your rent. Rent is the highest priority bill for most people, and these apartment communities are using these online screening companies who charge so much for their stupid algorithms that do not factor in real life instances, written by someone in another country, that are making millions off Americans. So really, apartments in tight market areas, should just say, we want well to do, perfect on paper tenants, and that is all we will except. Because if you have 5 people, and 4 have 800 scores and one has 560, who do you think the apartment will rent to? That is what i hate about the real estate business, when times are hard they cry like babies, and soon as it is good, they turn their nose up at poor people, looking to find a safe place to live.
Justtryingtomakeit
October 10, 2020

In reply to by fight4thepeople

I understand the frustration of trying to rent without a great credit score but all applicants need to remember that the property belongs to the landlord. Not all landlords own lots of property and make buckets of cash, many are retired persons who have spent their retirement savings on property to supplement social security. They don’t have the cash to just write off damages by tenants or unpaid rent. And eviction is Very costly. When applying for a rental you are actually asking someone for permission to live in a home they own. It is understandable that they are careful to try to predict if a prospective tenant will take care of their home, pay rent on time and not cause trouble for other tenants. Yes any loan you have had reflects on the prediction of how you will handle rent payment, after all the landlord does not know you. You are a stranger.
Jim B
August 24, 2018
I am a property owner that has hired a management company to manage my properties. I also hired them to find tenants for my properties. They conduct background and credit checks in accordance to the guidelines and laws. Once they find a prospective tenant that has passed the qualifications, they ask me for final approval. However, they will not share the background reports with me. They feel privacy laws prevent them from doing so. In my opinion, they've been hired to act as my agent to conduct business on my behalf. Therefore, I have a right to the information they collect necessary for me to make an informed decision. Thoughts or comments?
Carisa M
October 05, 2018
I need advise please! I am fully disabled I have lived in a place for 16 years. But my daughter and I need a fresh start so I applied at an apartment complex everything looked great until they did a current landlord background check on me. The agency that rents to me I had a whole bunch of BS lies that they shared to this person. When my ex-husband lived in the home five years ago there was issues between him and management . But in the last five years they keep me one notice to get a new tag on my car other than that I’ve had no late payments no complaints. But when she gave her report she said I was late on rent all the time that she has to give me notices on the regular basis for cleaning up my yard or moving junk vehicles. None of which are true. So no the last two places we have a plied for we have been denied for because of this I guess my question Is what are my rights? How can I get a fresh start when I have somebody you slandering my name? Please help me if you can I would appreciate it
FTC Staff
October 15, 2018

In reply to by Carisa M

If the apartments you are applying for are calling your landlord directly, then the Fair Credit Reporting Act doesn't apply. You could check with your city or county to see if there are local laws that apply to your landlord's comments.

If the apartments you're applying for are using a third party company (meaning a consumer reporting agency) to check your  background, then the Fair Credit Reporting Act applies. The apartments are required to give you an adverse action notice that includes the name and contact information for the credit reporting agency that prepared the background report. You can get a free copy of the report from the credit reporting agency if you ask for it within 60 days of the adverse action, and you can dispute the inaccurate information with the credit reporting agency.

If the credit reporting agency doesn't resolve the dispute to your satisfaction, she can give them a statement for them to add to your file. You can also file a dispute with whoever gave the credit reporting agency that inaccurate information.

You may want to contact legal aid. Sometimes, legal aid lawyers can negotiate for tenants to get a “neutral reference” if the tenants  agree to move out within 60-90 or even 180 days.

You could also report a business to the FTC at FTC.gov/Complaint. The information you give goes into a secure database that the FTC and other law enforcement agencies use for investigations.

Tish
October 16, 2018
Potential landlord was supposed to run a background check and due to a delay of two weeks without the report we decided not to rent the unit. After backing out the landlord got the background check. Since we are being charged for it do we have the right to have a copy of it?
Linda
January 01, 2019
Paid $70 for background checks to rent a mobile home lot for an existing home in the park. I planned to pay cash for the mobile home. After checking AZ state laws, called park office to find out if seller was in violation of any of their regulations. She said she would have the lot inspected. She called back and said the home was not saleable. I asked why they took my application and charged me when they new the home had violations? She said they could not disclose seller's business with me. Previously, she said to bring the title with my name on it so that they could make a copy of it before signing the lease. I found out from seller that he had been given notices of repair from management, that he initially had not disclosed to me. Had I not checked the law, I would have been responsible for repairs, and not allowed to reside there until repairs were made. Therefore, I requested that park mngmnt refund the $70 application fee and was refused. Also, the $500 earnest money was not refunded by the seller, stating he already spent it. Is there any recourse I have to get my money returned?
Rashad
February 23, 2019
Are there any agencies out in which that could help me in this situation with my landlord pay 6:50 to move in a unit in which needed a lot of fixing up the landlord agreed for me to pay him 6:50 to move in with the instruction an agreement that he will fix what needed to be fixed call to us being able to live safely in the unit I agree to paying him 650 and also take the ductions from receipts and which what work that I did to the unit after I did some work to where I can move my family in he initially asked me for extra amount of money in which I didn't have and we were still in the arrangement on fixing the place up so I would give him so much and more than have of the rent. The third month rolled around I had given him half of the rent for each month based on the work that he did not do and that was the agreement he wouldn't look at my receipts and he also told me to vacate if there was any fact or any thing that he may owe me he told me to take up whatever I fixed and move out didn't have no place to go with four children and a fiance living in harsh conditions in which the landlord took electricity meter off of the house took off electrical panels switches to the electrical and also turn my water off and in the process of it destroy devalle in which what cuts it on and off really would like someone to help me I was unlawfully evicted and pushed out of a unit
FTC Staff
February 27, 2019

In reply to by Rashad

Your city or county should have a department to help people with housing problems. You could call the the housing department of your city or county and ask for help with your landlord. Or, you could talk to a Legal Aid lawyer about the problem. Click on Legal Aid and you can search for a lawyer close to you.

Jeff Redd
May 03, 2019
My question is who is the organization or governing body who decided to allow potential landlords or apartment management companies to use credit ratings as a determining factor on an apartment rental application? I believe rental history should be separate from purchasing history, for the simple fact, that most people make mistakes when it comes to purchases more than they would when it comes to places pertaining to where they lay their heads. I am sure rental companies would disagree, but your percentages are just that, percentages, stats, and each person is different. How can we go about talking to the organization to get this modified to an extent to where credit does not keep people from renting homes? I understand using credit when buying a home or big ticket items, but renting a home? Sure, you have a history of damaging a person's property, or actually got evicted, or some other factor I may be omitting, because soon, we won't be able to rent anywhere! Last, in Georgia, when a management company denies your app, what can you do, to fix the issue, because EVERY apartment is going to keep turning you down!
Rozadoplacy
July 27, 2019
Great post!

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