Credit Reporting

As part of your non-discriminatory application standards, you should obtain a credit report for all adult applicants.

A couple of things you must remember:

1. To run a credit report, you MUST obtain the written permission of the applicant. Do not assume that an applicant will assume or implicitly understand you will obtain their credit report just because they have applied for your rental unit. Many landlords fail to follow this essential advice.  Verify your standard application form has a place where you obtain the applicants’ permission to run a credit report, as well as authorization to check their employment, rental history and permission to conduct a background investigation.
2. Do not accept a credit report run by the applicant.  Thank them for their effort to move the process forward quickly by coming prepared, and then run your own credit report.  Unfortunately in this day of Photoshop, it is entirely too easy to falsify a credit report.  As a precaution, you should always run your own credit report at the time of the application.  Anything else runs the potential of being stale dated or inaccurate.  
3. When you are involved in obtaining consumer credit history, your behavior is governed by the Fair Credit Reporting Act (FCRA). This is a federal law and it has strict rules you must follow. For example, if you deny an applicant or you CHANGE any normal term of tenancy, such as the security deposit, based on information you obtained in whole or in part based on consumer information, you must provide written notice of the denial and provide details regarding the denial or change of terms. These notices are very technical. A valid Denial to Rent letter and a valid Notification of Change of Terms letter can be purchased from the MRU store in the Credit section. Practice Tip: If you elect to draft your own versions of these documents, please remember that you must state that the consumer credit reporting agency was NOT involved in the decision to deny or to change the terms of extending credit to your applicant.
4. You must advise the applicant of their rights under FCRA. MRU has developed a standard brochure which can be used for this purpose which is also available in the Credit section of the store.
5. Once the credit report is run, you should apply your non discriminatory credit standards. Needless to say, if you don’t have written standards before you run the credit report, the report will do you little good as you will have no methodology to judge it by. Taking into consideration your risk tolerance, you should develop your credit standards. You may be willing to accept an applicant that has been repeatedly late, but never more than 30 days. Or you may be willing to accept someone who has filed bankruptcy, but it must be 5 or more years ago. The important thing is that you have standards and you apply them to everyone equally.
6. The changing credit landscape poses special problems for the property owner and manager.  Watch this video from TransUnion to learn how to deal with the credit problems of today’s renter!

Additional information can be found on our Rejecting an Application page.

Last Revision: 8.08.2009 V. 1.1