When it comes to finding a new tenant for a rental property, a must for any landlord is to pull a credit report for any qualified tenants. However, a prospective tenant can provide their own credit report, but the landlord is under no obligation to use that report. Many landlords will instead have tenant screenings services pull more complete reports, which generally include credit checks, criminal background, and eviction history.
Why Would a Tenant Submit Their Own Credit Report?
Application fees are often used to cover the cost of hiring a service to pull a tenant screening report, which usually includes a credit report. An applicant may try to have the landlord reduce or waive the application fee in exchange for submitting a credit history themselves.
It’s common practice for landlords to charge application fees except where it is illegal to do so. Massachusetts is the only state that prohibits application fees, while a few others have limits on how much can be charged.
Under federal law, each of the three credit agencies are required to provide a free credit report once per year. An applicant can pull their credit report for free, and then submit that to the landlord.
Be wary of a tenant submitting an outdated credit report. It’s possible they could send over a report they pulled six months ago in order to hide a payment default from three months ago.
Do Landlords Have to Accept an Applicant-Pulled Credit Report?
There is no legal obligation to accept an applicant-pulled credit report, nor are landlords obligated to reduce or waive the application fee in exchange for a freely supplied report.
Most landlords will opt to not accept a free credit report supplied by the applicant. There are a few reasons for this:
- Credit reports may be out of date – If an applicant pulled a report several months ago, they will not be able to obtain another free one.
- Most landlords will want to see more than a credit report – It’s best practice for landlords to order a full tenant screening report from a professional service. If you are already planning to do this, there is no reason to accept just a credit report from an applicant. You’ll be getting that information plus much more in the full report.
- Application fees already cover the costs – Most landlords don’t pay for tenant screening reports—that’s what the application fees are for. Many will not be interested in changing their policy to accommodate a less complete report.
- Fraudulent reports – For someone with the right skills, adjusting some of the data before submitting isn’t hard.
In most cases, landlords will require all their applicants to pay the application fee, meaning there’s no reason to allow prospective tenants to submit their own report.
Can Landlords Require Applicants to Submit Their Own Credit Report?
There are certainly landlords that don’t plan to do full background histories on each prospective tenant. In these cases, they may ask that each applicant provide their own credit report.
Landlords may ask for applicant-submitted credit report in these situations:
- They manage a low-quality property and expect that most, if not all, of the applicants will have serious marks on their screening report.
- They believe they’ll get more applicants with a less-thorough background check and lower application fee.
- They want to pocket the application fee themselves instead of spending it on a tenant screening report.
However, most landlords will want to collect a more thorough history and will likely hire a service rather than ask the applicants themselves for the credit report.
It may seem cheaper to spend less on screening reports, but in the long run, property owners will pay much more in evictions, property damage, and unplanned vacancies caused by under-screened candidates.
Can Landlords Reject Applicants for Credit History?
Legally, landlords are within their right to reject applicants for negative marks on their credit history. In fact, it’s one of the more common reasons for turning down an application, as having tenants with a strong history of paying their financial obligations is paramount to the long-term success of a rental.
In addition, applicants may also be rejected for refusing to submit a credit report or not allowing a landlord to pull a full tenant screening report.
How to Deny Applicants for Poor Credit History
Landlords also need to ensure they comply with the Fair Credit Reporting Act (FCRA) when denying an applicant for credit reasons.
Taking a negative action against an applicant for a mark on their credit history is called an “adverse action.” Examples of this include:
- Denying an application
- Requiring a co-signer
- Requiring a larger security deposit
- Requiring higher rent
In any of these cases, the landlord must give an adverse action notice. These can be made orally, electronically, or in writing. It is required to include the following:
- The applicant’s credit score.
- The name, address, and phone number of the consumer reporting agency (CRA) that supplied the score.
- A statement that the CRA didn’t make the adverse decision themselves and can’t give a reason as to why the decision was made.
- Notice of the applicant’s right to receive a copy of their report from the CRA within 60 days.
- Notice of the applicant’s right to call into question the accuracy of any information provided
