Updated August 2021
What do a credit freeze and background check have in common?
For landlords trying to find the best tenants for their rental properties, credit freezes can present an interesting situation to navigate. What do you do when information on a tenant’s recent credit history isn’t readily available?
Landlords should always run a background check on an applicant for a vacant rental unit. It’s one of the best ways to find out what kind of tenant they will be. Part of that background check includes a credit check.
However, as more and more landlords are running into the situation where an applicant has a credit freeze on their background check, many believe that the landlord can’t get any information. Why would an applicant do this, and what does it mean for landlords? Today, get the information all landlords need to know about credit freezes.
A Table Of Contents On Credit Freezes & Background Checks
Do you know how to handle screening an applicant who has a credit freeze on their credit report? Work through today’s article to get the details you need to proceed:
- What Is A Credit Freeze?
- Why A Tenant Might Freeze Their Credit
- VIDEO: What To Do If An Applicant Froze Their Credit
- Does A Credit Freeze Affect Background Checks?
- How To Work Around A Tenant Credit Freeze
- Do Tenants Use Freezing To Hide Bad Credit?
- Credit Freezes & Apartment Applications: Tenant Questions
- Why You Should Always Do A Background Check
- FAQs About Credit Freezes And Background Checks
A freeze on credit means that no activity is permitted without express permission from the credit holder. Depending on the process used to freeze the credit reporting, nothing is released without special confirmation.
Each credit bureau has its own procedure for handling this process, but the bottom line is very similar across the board. Only certain types of creditors will be able to see the credit. The credit holder is the only person who will be able to unfreeze their report or grant temporary access to other creditors.
The first thing that landlords need to understand is why a tenant might have their credit frozen. Since 2018, it has been free and legal for anyone with a credit report to freeze and unfreeze their credit at will through the major credit bureaus. But why would people utilize this service?
The main reason people freeze their credit report is that their data has been compromised or they have had personal information, such as their Social Security number, stolen.
Identity theft is growing more common every year, and large data breaches seem more commonplace than ever. In many cases, credit freezes are done as a type of damage control after a verified data leak, such as when your data on a certain website is compromised.
Scammers, thieves, and no-good relatives may also try to steal someone’s identity. One of the ways people try to protect their credit is by enacting a freeze with a credit reporting company or third-party company.
Though most credit experts focus on freezing credit after a data leak, many have also mentioned that it can be helpful to use credit freezes as a preventative measure to protect your identity and other personal information.
This is particularly useful for anyone who has been a targeted victim of identity theft and worries that the same situation will happen again. For example, sometimes, people have family members who continually try to take advantage of their financial situation. By keeping credit frozen, loans and other lines of credit cannot be started under any name without express permission.
Beyond out-of-line family members, having credit frozen also prevents fraudsters from easily opening fake accounts. Creditors will not be able to open new accounts without permission from the credit holder, and that will prevent many instances of identity theft.
In today’s video, Eric and Andrew discuss what property managers and landlords should do when they come across an applicant with frozen credit. Their discussion is a great basis for getting a deeper understanding of frozen credit and how it plays into tenant screening:
Now, let’s get to the question that impacts landlords the most: Does a credit freeze affect a background check?
A credit freeze will impact the credit-related aspects of a background check. The criminal, eviction, and other parts of background checks that do not come from credit bureaus can still be run as you would generally do tenant screening.
However, you will not be able to pull up a credit report from a credit bureau if the applicant has a freeze on their account. This means you will not be able to see any type of credit history, credit score, or any other hidden information behind that freeze.
If an applicant is unwilling to temporarily unfreeze their credit report or otherwise grant you access to this information, you will not be able to do a credit check. Most states would say that it is then within your rights to reject the applicant. Without a credit report as part of your tenant screening, renting to an applicant can be very risky.
In some cases, an applicant will be open with you that they have their credit frozen. Though they have set this limitation on their credit report, they might be unsure or reluctant to release access to their credit history.
For this reason, you must have an understanding of how applicants can grant you access to their credit history. It is impossible to access this information without their consent, but a willing tenant can give access without unfreezing their credit.
Let’s talk about how.
Potential applicants may be willing to grant you temporary access to their reports. Let them know through which credit bureau you would like to run the check and when you plan to run it.
Applicants can request their credit be unfrozen for a specific day or range of time. Additionally, it is possible to grant permission for specific creditors to receive a credit report from a credit bureau.
For more information on managing frozen credit, including how to grant temporary permissions to creditors, visit each credit bureau’s site:
Any tenant who is ready to be cooperative and provide you with the information you need to do tenant screening will be able to grant you access to their credit history. If a potential applicant is unwilling to consent to a credit check, it is within your rights to reject their application on this basis.
There are very few situations that would require an applicant to be unable to grant this type of temporary access. Applicants who are a good fit for your rental business will be able to explain any such situation thoroughly, so it is best to keep this in mind when determining whether or not to proceed without access to their credit history.
Here at RentPrep, We offer a SmartMove report that is landlord-driven. The landlord places the order and can choose what additional searches they would like to use. This means the tenant applicant controls the process and decides who can view their report.
The only part of the process the tenant is involved in is verifying their identity to generate their report and they do not receive a copy of the report once it generates, it goes right to the landlord.
The applicant can make arrangements to request the report with the credit reporting companies.
When credit information is not readily available about a rental applicant, many landlords immediately see that as a huge red flag. Is this reaction reasonable, and should frozen credit be seen as a red flag as well?
Since identity theft has been a big issue over the last several years, many people choose to lock up their credit. However, many people may try to use this procedure to avoid having a landlord look into their poor credit history. Applicants may claim their reporting is frozen to trick the landlord into renting to them despite their bad credit.
Ultimately, there is no way of knowing if an applicant is using frozen credit reports to hide something or genuinely trying to protect their financials. Still, it is relatively easy for applicants to grant temporary access to landlords to do tenant screening. Most applicants who are serious about wanting to rent your property will work this out with you.
Landlords should never rent to someone without getting a complete background check. It would be a mistake to make an exception because someone has frozen their credit reporting. Landlords need to ask the applicant to do what it takes to release the information for the rental application.
If the applicant claims they cannot, then something may be suspicious.
All in all, landlords should not jump to conclusions that an applicant is trying to get around a background check if they freeze their credit. However, landlords should follow through with the applicant to get the information they need. A legitimate credit freeze does give people the option to grant permission to access that info, including landlords.
Applicants forthcoming about their frozen credit but unsure about how to move forward may have questions for you. While it’s not your responsibility to be their primary resource, it can help move things along if you have some information on hand for them.
These three questions are those asked most frequently by rental applicants who are cooperative, but hesitant about unfreezing their credit. Here is some information that can be helpful for all parties.
Depending on the information the third party running the checkis looking for, you may need to temporarily unfreeze your credit or grant them access when running a background check.
Background checks are used to access different types of information in different situations. If the party running the background check needs to access any part of your credit history or your credit score, it will be necessary to edit the status of your credit freeze in some way.
Most landlords will require that they can run a credit check on an applicant before renting out their property. If you do not grant permission to the landlord, you may not be able to apply for an apartment. Many landlords do not accept applications that do not include this consent and will immediately reject them.
Once you have made it through the application process, there is no reason why your credit history and reporting cannot remain frozen while you rent an apartment. The background and credit check part of tenant screening is a quick, temporary process and not an ongoing procedure.
Freezing your credit reporting can be reimplemented immediately after the credit report has been accessed. If your rental application is accepted, you can rent an apartment without needing to unfreeze your credit.
As a landlord, your rental properties are the basis of your business. Protecting these assets needs to be a significant priority, and choosing the right tenants is a huge part of that protection process.
Tenants are granted permission to live in your property without interruption for the duration of their rental period. Irresponsible tenants will often cause damage to your investment, and often, these tenants could have been vetted out during tenant screening.
Background checks give you the chance to ensure that the applicant is truthful on their application and that their general financial and criminal history doesn’t raise any major red flags. Just adding this simple procedure can revolutionize how your rental business runs.
If your tenant screening process is causing you needless frustration, it might be time to upgrade to something that provides more than the basics. At RentPrep, we have various tenant screening options that include everything from applicant background checks to credit reports. For more information about price and packages, click here now.
The exact list of third parties that will have access to a frozen credit report may vary by credit bureau, but generally includes the following:
- Companies, such as credit bureaus, which allow you to access or monitor your report
- Companies that provide you with copies of your score or report at your request
- Government agencies in specific situations
- Companies using the information for screening or insurance underwriting
- Creditors that you have accounts with
- Collection agencies collecting on your account
- Companies investigating or preventing fraud
- Companies making pre-approved credit or insurance offers to you
For more information about who specifically can access your data and what they can see, contact the relevant credit bureau or visit their website.
If a creditor attempts to run a credit report on a frozen credit account, they will see a message which alerts them that the account is frozen. The creditor will not be able to see your personal financial information or credit report.
Credit bureaus are required by law to implement credit freezes within five days of receiving a verifiable freeze request. The credit bureaus have three days to remove a credit freeze after this request is made.
In many cases, credit freezes can be made available within the hour, especially when contacting the bureau online. Temporary freezes and lifts, for example, can often be done within three hours, which can be helpful for landlords and rental applicants.
Some tenants and landlords inquire about whether or not it is possible to freeze rental history in the same way that it is possible to freeze a credit report. Ultimately, there is no way to do this in such simple terms.
However, an individual can have faulty, outdated, or inaccurate information removed from public records. The individual will need to contact the institution that manages those files to request an alteration. This process varies from place to place, so be sure to read up carefully on how to do this.
When seeing a credit freeze on a background check, it is common for landlords to assume they should automatically reject this applicant. Busy landlords managing many applications may decide to set up this type of rejection, but it’s not the right choice for everyone.
Often, rental applicants will be ready and willing to work around their credit freeze to grant you the access needed to vet their applications properly. While this takes a little more time, it isn’t a considerable delay and can be completed quickly if the applicant is cooperative.
Keep this all in mind as you strategize the right tenant screening practices for your business!