How to Screen Tenants the Right Way: An FCRA-Aware Guide for Landlords

Screening tenants the right way means applying objective criteria to all applicants, getting written authorization from applicants, working with a trusted consumer reporting agency, and complying with FCRA notice requirements. 

Any time a landlord uses information from a consumer reporting agency when deciding on an applicant, the Fair Credit Reporting Act (FCRA) applies. In this article, we’ll walk you through each step of the screening process and explain how to screen tenants in compliance with both fair housing and FCRA laws. 

This guide offers general guidance for the screening process, not legal advice. Landlords should review state and local guidance before starting the screening process to ensure tenant screening compliance.

Ready to send a screening request that complies with the FCRA? All you need is an applicant’s name and email address to start your FCRA-compliant tenant screening. 

What Is an FCRA-Compliant Tenant Screening Process? 

A FCRA-compliant screening process starts with objective, written screening criteria. Next, send screening requests, get written authorizations to run reports, and collect a complete rental application. 

After receiving the necessary authorizations, run the screening reports with a trusted consumer reporting agency. Once you receive the reports, review the entire application, applying a consistent review process for all applicants. 

For applicants who meet screening criteria, send a lease offer and move forward with executing a lease agreement. For applicants denied or conditionally accepted, send a denial letter or notice of conditional approval. If the applicant is denied or conditionally approved because of information from a consumer reporting agency, you must provide the tenant with an adverse action notice. 

After completing the screening, keep documentation of the entire process, including the rental application screening, authorizations to run reports, consumer reports, and adverse action notices. 

Step 1: Establish Lawful, Written Tenant Screening Criteria 

While the FCRA does not require landlords to have written screening criteria, it’s a best practice to ensure all steps of the screening process are fair and legally compliant. Having objective screening criteria from the outset and consistently applying those criteria to all applicants ensures compliance with fair housing laws. It also makes things straightforward when landlords have to issue an adverse action notice under the FCRA. 

Common criteria to include are: 

• Income requirements, including specific rent-to-income ratios
• A minimum credit score 
• No evictions within a set period of time, often 3 to 5 years
• A maximum debt-to-income ratio
• No felonies or violent crimes within the past 5 years 
• No pets 
• No smoking 

Note: some states restrict how landlords can evaluate credit history and criminal history. Consult local laws when setting screening criteria to ensure compliance with all state and local fair housing requirements. 

Here are some best practices for establishing screening criteria: 

• Set your criteria before you start collecting applications
• Use objective criteria and avoid any requirements related to a protected class under fair housing laws 
• Put the criteria in writing so they are documented and easy to apply
• When required by state or local laws, disclose the criteria before starting the application process 

Step 2: Collect a Complete Rental Application With Necessary Authorizations

The first official step of screening an applicant includes having the applicant complete a rental application. This serves two important purposes: 

1. Gathers key background information 
2. Gets the necessary authorizations to run all screening reports 

A good rental application collects key personal information, rental history, references, and employment history. It also serves as a way to screen applicants who don’t meet basic requirements – for example, not meeting occupancy limits or having pets when there’s a no-pet policy. 

Perhaps most importantly from an FCRA perspective, it is an opportunity for landlords to get authorizations to run screening reports. Landlords must have this written authorization to request screening reports from a credit agency, and they should keep the application as documentation that they received the necessary authorization. 

ezLandlordForms offers a free online rental application and a free downloadable rental application to make it easy to provide all applicants with a standardized rental application. 

Step 3: Order Tenant Screening Reports From a Consumer Reporting Agency 

Landlords generally get three reports from consumer reporting agencies: a tenant credit check, criminal history background check, and an eviction history report. The easiest way for landlords to collect this information is through a trusted consumer reporting agency. 

For example, ezLandlordForms offers complete FCRA tenant screening services through TransUnion, one of the “Big Three” credit reporting agencies. Its practices comply with the FCRA, and it filters information in accordance with state-law restrictions. Because of this, the reports landlords receive may vary from one state or city to the next. 

Step 4: Have a Consistent Process for Reviewing All Applications

Landlords can ensure legal compliance and efficiency by having a consistent process for reviewing all applications. For example: 

1. Collect the rental application 
2. Get consumer reports 
3. Verify the information on consumer reports matches information on the rental application; request additional documentation or ask questions about any discrepancies 
4. Evaluate data in the reports to ensure it meets written screening criteria 
5. Make a decision based on whether the applicant meets all screening criteria 
6. Document the decision and keep all relevant reports and documentation. 

As a landlord, you can develop a review process that fits your workflow. But whatever that process is, apply it to all applications to ensure you are screening applicants consistently. 

Step 5: Approve, Conditionally Approve, or Deny the Rental Application 

There are three potential outcomes when you decide on an applicant: 

1. Accept the applicant. If an applicant is selected, send a rental application approval letter and move forward with lease signing. 
2. Conditionally accept the applicant – for example, accepting the applicant with a co-signer, increased security deposit, or higher rent. If the conditional acceptance is based on information from a consumer credit report, the landlord must issue an adverse action notice. 
3. Deny the applicant. Send a rental application denial and adverse action notice. 

The FCRA requires a landlord to send an official adverse action notice any time an adverse action is taken based on information received from a consumer reporting agency. Examples of adverse actions include: 

• Denying the rental application 
• Requiring a guarantor or co-signer 
• Requiring a larger security deposit 
• Increasing the rent amount 
• Making the lease terms less favorable

Always keep a copy of the adverse action notice to ensure good documentation. 

Frequently Asked Questions About FCRA Screening Procedures 

Does the FCRA Apply to All Tenant Screenings? 

No, the FCRA only applies when landlords get reports from consumer reporting agencies. If landlords use consumer reports in tenant screenings, then the FCRA applies. 

What Does the FCRA Require Landlords to Do? 

The FCRA requires landlords who use consumer reports in their tenant screening process to: get authorization from the applicant, use the report only for the permitted purpose, provide an adverse action notice whenever an adverse decision is made based on information from a consumer report, and store and dispose of information securely. 

Do I Need Written Consent to Run a Tenant Background Check?

Yes, the FCRA requires landlords to get written consent from applicants before running screening reports. It’s ideal to get this authorization as part of the rental application.  

When Do Landlords Have to Send an Adverse Action Notice? 

Anytime an adverse action is taken based in part or solely on information in a consumer report, the landlord must provide the applicant with an adverse action notice. An adverse action includes a denial, co-signer requirement, increased security deposit, or rent adjustment. 

What Must an Adverse Action Notice Include? 

The adverse action notice must include the action taken, the name and contact information for the screening company used, a statement that the reporting agency did not take the adverse action, notice that the applicant can request a free copy of their report from the reporting agency within 60 days of the notice, and a statement explaining that the applicant may dispute any incorrect information. 

How Long Should I Keep Rental Application Records? 

There is no set requirement for how long landlords need to keep screening records. Unless state or local laws provide otherwise, it’s a good practice to keep all records for three years. Landlords need to securely store and destroy all personal information obtained during the tenant screening process. 

Key Takeaways for Landlords About How to Screen Tenants in Compliance with the FCRA

The key to FCRA-compliant screenings is having a good screening process, applying it consistently, and documenting every step of the process. It starts with written criteria, a thorough application with screening authorizations, and a trusted consumer reporting agency. 

Landlords then need a consistent process for reviewing applications and providing tenants with the required notice once a decision is made. 

As you create and execute a system for screening tenants in compliance with the FCRA, don’t forget to check local and state laws to ensure your system complies with all applicable requirements. If you have any concerns, consult a local attorney for guidance.