Fair Credit Reporting Act: Details for Landlords and Tenants

Looking to rent a new place? Landlords typically check credit scores as part of their screening process. Those three numbers offer insight into your creditworthiness and ability to keep up with the monthly rent payments.

Both tenants and landlords have a vested interest in understanding the Fair Credit Reporting Act (FCRA) regulation, as this law is the gatekeeper that guides and protects the use of information in credit files. In this article, we'll unpack the key provisions of the FCRA, outline the rights and responsibilities it grants to landlords and tenants, and highlight best practices for verifying compliance.

You'll learn how landlords can legally obtain and use tenant credit reports, the procedures they must follow, and the limitations on what information they can consider. Additionally, you'll understand tenants' rights to access their reports, dispute any inaccuracies, and limit access to their personal data.

Keep reading for an overview of the FCRA's impact on the rental application process and how to ensure a fair and transparent exchange of credit information.

Understanding the Fair Credit Reporting Act

The Fair Credit Reporting Act seeks to confirm the accuracy, fairness, and privacy of consumer information in the files of consumer reporting agencies. The Fair Credit Reporting Act aims to ensure the accuracy, fairness, and privacy of consumer information held by credit reporting agencies. It regulates how each consumer reporting agency can collect, access, use, and share the data in your credit report.

Two federal organizations enforce this legislation:

1. Federal Trade Commission (FTC): This government agency educates consumers and businesses about their rights and responsibilities under the FCRA. They enforce compliance by investigating violations and taking legal action against offenders.
2. Consumer Financial Protection Bureau (CFPB): The CFPB issues regulations under the FCRA, supervises financial entities for compliance, and manages consumer complaints related to credit reporting.

Landlord responsibilities under the FCRA

Landlords should be aware of the regulations under FCRA and how to handle consumer reports correctly during the tenant screening process. Here's a guideline:

Get permission to pull consumer reports

Your standard rental application probably asks for the applicant's full name, contact information and social security number. However, landlords cannot simply pull a credit report just because an applicant provides this information.

Under the FCRA, you must get written permission must first. Failing to get this explicit consent could constitute a violation.

Provide disclosure

Along with seeking permission, landlords must provide a disclosure to the tenant that informs them that you plan to use a credit report in the decision-making process. Include this disclosure in your standard rental application.

Use a legitimate tenant screening service

Use a reputable tenant screening service like Azibo that works with a consumer reporting agency to access credit reports. These agencies are regulated under the FCRA and verify that the information provided is accurate and handled securely. Using unauthorized methods to access credit information can lead to legal consequences.

Follow adverse action procedures

If you decide to reject a tenant application based on information found in the credit report, you'll need to follow specific adverse action procedures. This involves:

• Notifying the applicant: Provide the applicant with an adverse action notice that includes the credit reporting agency's contact information. Inform the applicant of the specific reason for the adverse action, and clarify that the decision was made by you, not the credit reporting agency. Include the credit score and the date you pulled it as well.
• Right to a free credit report: Inform the tenant of their right to obtain a free copy of their credit report from the reporting agency if requested within 60 days.
• Right to dispute: Make sure the tenant is aware of their right to dispute the accuracy or completeness of any information in the report.

Secure handling of credit information

Landlords must handle all credit information securely to prevent unauthorized access, use, or sharing. This includes protecting storing physical copies and using strong security practices for digital information.

When you no longer need the information be sure to dispose of credit reports by shredding physical documents and deleting electronic files to prevent identity theft or data breaches.

Screening policy best practices

Create a screening policy that sets credit criteria you consistently apply across all applicants to avoid any form of discrimination. Document your criteria and overall rental application process to provide standardized guidance and rationale for decisions.

Tenant communication

Let potential tenants know about your screening policy and requirements before they apply. This should include what specific credit information you'll evaluate, how you derive any scoring or recommendation, and how that impacts the final screening outcome.

Be sure to review your screening policy regularly to confirm it remains in compliance with the FCRA and other relevant laws. Adjust as needed based on legal updates and operational insights.

Applicant rights under the FCRA

Prospective tenants seeking approval for a rental property should be aware of their rights around their credit report. These rights include:

Access to credit reports

All consumers have a right to a free copy of their credit report from each of the major credit reporting agencies once every 12 months. You can also get a free report after a denial of credit based on your report if you're unemployed and seeking employment or if you believe their report contains errors due to fraud.

To access your report from the credit bureaus:

• Identify the bureaus: The three major credit bureaus in the United States are Equifax, Experian, and TransUnion. Visit their official websites to request your credit file.
• Provide information: Include your name, address, Social Security Number, and date of birth to verify your identity.
• Annual credit report: You can request one free credit report from each credit bureau every 12 months through www.annualcreditreport.com. This is the only authorized website for free credit reports under federal law.

Disputing inaccurate information

The information on your credit report should be complete and accurate. Credit reporting agencies have a duty to confirm the data they collect and distribute is fair and correct. If you find errors or disputable information, you have the right to request corrections to maintain the integrity of your report.

You can file a dispute by doing the following:

• Gather documentation: Collect any documents that support your claim, such as payment records or court documents.
• File the dispute: Contact the credit reporting agency that issued the report. You can file the dispute online, by mail, or by phone.
• Wait for a response: The credit bureau has 30 days to investigate your dispute. They will review your claim and consult the organization that provided the data. They'll update the credit report if they find the information is inaccurate.
• Receive results: The major consumer credit bureaus will provide results of the investigation in writing. They'll also provide a free copy of your amended credit report if the dispute results in a change.
• Verify corrections: Check the updated report and verify corrections. You can add a statement of dispute to your credit file explaining your side of the story if you don't agree with the information.
• Notify other credit bureaus: If inaccurate information appears on multiple credit reports, you’ll need to dispute it with each bureau separately since they do not share this information.

Limiting access to credit reports

Third parties can only access your credit report for valid reasons. This verifies that your personal financial information remains confidential until legally justified.

Fraud protections

To protect yourself from fraud or identity theft, you can set a fraud alert on your credit file with each of the credit reporting agencies.

The FCRA also provides additional protections for identity theft victims. If you have been a victim, you can place an extended fraud alert on your credit file that lasts 7 years, rather than the 1 year for a regular fraud alert.

Violations of the Consumer Credit Protection Act

If you are a tenant who believes a landlord has violated the FCRA, there are several steps you can take to address the situation:

• Review the FCRA requirements: Make sure you understand the specific requirements of the law. Landlords violate the FCRA by not getting written permission to check your credit or failing to provide an adverse action notice or required disclosures.
• Document everything: Keep detailed records of all communications with the landlord and any documents or correspondences related to your application and credit check.
• Contact the landlord: Sometimes, you can resolve issues by directly contacting the landlord or property management company. Explain your concerns and reference the specific provisions of the FCRA that you believe were violated.
• File a complaint with the FTC: You can file a complaint with the FTC online or by calling their toll-free number.
• Consult with an attorney: Find a consumer rights or tenant law attorney that will help you understand your rights and options.
• Report to your local consumer protection office: Contact your local consumer protection office for assistance and information on filing a complaint against the landlord.

Renting with the Fair Credit Act in mind

Both landlords and tenants should understand the Fair Credit Act and its implications for the rental process. For landlords, following the rules helps avoid legal issues when pulling tenant credit reports. You can access and use this data legally by providing proper disclosures and meeting adverse action requirements.

For tenants, being aware of your rights under the FCRA puts you in the driver's seat of your financial information. Accessing credit reports, disputing errors, and limiting access to personal data can prevent potential screening snafus and reduce the chances of identity theft.

Both parties benefit from a fair exchange of credit information, so strive for clear communication and following best practices to build trust and foster a successful tenancy.

Fair Credit Reporting Act FAQs

What is an example of a violation of the Fair Credit Reporting Act?

A violation of the FCRA might look like a lender failing to notify an applicant of adverse action taken based on their credit report.

What is a FCRA consumer report?

A FCRA consumer report includes information on a person's creditworthiness, credit standing, or credit capacity, used to evaluate eligibility for credit, employment, or housing.

What does a FCRA report show?

A FCRA report shows credit history, employment history, and other personal data used to assess financial reliability and make eligibility decisions.