Property Management, Tenant Selection, Real Estate News & Tips

The 411 on Tenant Screening

By on January 7, 2015 in Education with 1 Comment

thinkingTenant screening is quite possibly the best way for a property manager or landlord to make certain they are choosing the best tenant possible. There are rules, as with anything, that have to be followed when tenant screening. The biggest regulators of course are the Federal Fair Credit Reporting Act and the Fair Housing Act. In addition to these regulations also always check state and local regulations.

When you order a tenant screening report which most likely at a minimum includes; credit, eviction, and criminal data. This information without a question is subject to both of the Acts mentioned above. As a landlord or property manager there must be reasonable procedures and criteria  in place to make sure you are always abiding by these regulations. Having a procedure to follow assures that you are being consistent with each applicant when tenant screening. An example could be that one of your criteria is that you won’t rent to someone who has a felony record. It is very important that you always follow whatever criteria you have established to show that you are treating each prospective tenant equally.  You don’t ever want to be accused of discrimination of one of the seven protected classes; race, color, national origin, religion, sex, disability, and families with children or you may end up on the losing side of a lawsuit. If a landlord or property manager orders tenant screening for reasons other than those allowable by law they would be held liable to the credit reporting agency and the tenants.

Landlords or property managers can order a report, once they have demonstrated to the credit reporting agency that one of the two following occurrences apply:

  1. ordering the report because an application was returned by a prospective tenant
  2. reviewing the credit of an existing tenant, or a former tenant who owes you money

Compliance with the Fair Credit Reporting Act requirements arise in two ways in the landlord/tenant relationship. The first is when the potential tenant initiates the application process. The second is during an existing landlord/tenant relationship, or in connection with a debt which arose from the relationship.

The first time compliance with the Fair Credit Reporting Act comes into play when the prospective tenant has filled out and returned a rental application. From this point, the landlord or property manager can obtain a credit report without any further authorization. I personally prefer to also include written authorization on the rental application even though it is not required. I include this authorization where it is plainly visible just above the signature line. Each person over the age of 18 listed on the application should sign the authorization.

The second reason that compliance with the Fair Credit Reporting Act requirements occurs during the lease agreement or if the tenant owes you money for past due rents. The landlord or property manager doesn’t have to obtain further permission to order a credit report at this point. Events that could trigger a reason to obtain a credit report at this point are; lease agreement expiration and renewal, if the tenant vacates property owing money, if there are damages to the rental property beyond the deposit, or a legal action that is tied to the lease agreement.

Now that you have legally obtained the screening reports now what do you do with them?  First off the report should never be given to anyone. The reports should be kept in a secure/locked location and access to these files  should be limited to those who need the information. It is even illegal to give a copy of the report to the tenant or prospective tenant in many states. The landlord or property manager can however, disclose the information in the reports to the tenant or prospective tenant if there is an action, such as denying the application based on the information obtained in the reports.

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About the Author

About the Author: Dulcey is both a private landlord and media contributor for Rentec Direct. Her passion is to bring up to date, useful information front-and-center for property managers and landlords. .

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  1. What I see so far is very exciteing. I have been “around the block” a few times in 30 years with tenants and have “the lumps” to prove it . Best Wishes, Victor

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