Landlord Credit Checks and the FCRA

Because property owners take a monetary risk when renting out their property, a landlord credit check is perfectly legal to look in to a potential tenant’s background. There are, however, several laws and guidelines such as the FCRA that landlords should be in compliance with. The Fair Credit Reporting Act is Federal law regulating the collection, use, and distribution of consumer credit information. You must also check your local state laws for regulations regarding landlord credit checks.

First and foremost, you must always have written consent from each person who you will be doing a landlord credit check on. Most standard rental applications will include a disclosure statement authorizing the screening. Always keep authorization for a landlord credit check on record indefinitely—whether the applicant is accepted or declined. This will protect you from potential disputes down the line.

If you decline an applicant who you have performed a landlord credit check on, you are required to notify them in writing. Your written notice must include the name and contact number to the credit reporting agency who provided the landlord credit check along with a notice that the applicant has the right to: (1) request a free copy of their report from the credit reporting agency (2) dispute invalid information on the report, directly with the credit reporting agency.

Remember that all information learned from a landlord credit check must be held in the strictest confidence and not shared with anyone. It must also be kept in a secure and private location that is not accessible to unauthorized third parties (i.e kept under lock and key or password protected). Some FCRA requirements may seem unimportant, but each one must be followed diligently to comply with the law and to avoid legal and punitive actions. Skipping any of these requirements could find you liable for willful or negligent non-compliance with the FCRA.

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