fcra tenant screening

Updated June 2021

Getting the most complete tenant screening report possible on a rental applicant is a major priority for landlords, but they must make sure they are following FCRA tenant screening rules. If they cross the line on how they screen potential tenants, landlords could be faced with a number of significant issues.

Whether you’re screening a tenant applicant or hiring an employee, an FCRA compliant background check is a crucial part of your process.

What exactly do landlords need to know about FCRA tenant screening, and why are these rules in place? Getting a deeper understanding of FCRA and why it matters will help ensure that you do not accidentally violate these important protections and privacy laws. We’re about to tell you everything you need to know.

A Table Of Contents For FCRA Tenant Screening

It’s time to get in the know about FCRA and how it’s going to shape your tenant screening processes moving forward. If you’re already familiar with these rules for how you treat your rental applicants, make sure you take a few minutes to refresh your knowledge and make sure your practices are fair and legal.

What Is The FCRA?

What Is The FCRA?FCRA stands for the Fair Credit Reporting Act. It is government legislation enacted to promote the accuracy, fairness, and privacy of consumer information contained in the files of consumer reporting agencies.

When tenant screening reports are generated or created, the rental applicant is protected by FCRA rules from their information being incorrectly exposed. The information in a consumer’s files can only be used for permissible purposes, and the FCRA dictates what those rules are.

Most background check companies are not FCRA compliant because they’re automated resellers of databases that are filled with errors and omissions.

FCRA Tenant Screening: Understanding FCRA Compliance

Some landlords who do tenant screening for criminal records and other background check information might not understand what must be done to ensure they complete a FCRA compliant background check.

Let’s break down appropriate FCRA tenant screening services and practices, to ensure you have a full understanding of what compliance looks like.

FCRA Rules Apply To Consumer Reports

Background reports run by landlords are considered consumer reports. Any background screening that is used to determine an individual’s eligibility for housing (or employment, credit, or insurance) and includes information about the individual’s credit standing or credit worthiness. It is considered a consumer report.

All consumer reports fall under the rules of the FCRA.

FCRA Rules On Consumer Reports

What exactly needs to be done to ensure that the consumer reports run while tenant screenings are fair and legal?

There are four specific things that must be done by landlords, tenant screening companies, and any other individuals involved in the process of running tenant background checks.

1. Make Sure It Is As Accurate As Possible

The FCRA says that you must ensure that the information gathered is as accurate as possible so that it does not reflect incorrectly or negatively on the consumer in question. FCRA compliance requires that information is related to the question, is accurate, and includes as much detail as possible.

This is to ensure that fair decisions and conclusions are made about the individual.

2. Permissible Purpose

Before getting any type of background check on a tenant, you must be able to show that you are gathering the information for a permissible purpose. Housing qualifies, but you first must have the applicant agree to the check. This is to certify that you are running the report only for the reasons that you state, and it also ensures that the individual is aware that the check is being done.

3. FCRA Information

Along a similar vein, prospective tenants must be told that you are doing the background check and through whom the background screening will be done. This is to ensure that they can review the background check for themselves if they desire. You must also provide them with the Notice to Users of Consumer Reports according to the FCRA.

4. Rights Of Tenants And Prospective Tenants

Finally, the FCRA says that tenants have specific rights, such as being able to see their files. Additionally, applicants can dispute any information they see on the report; you are responsible for keeping them up-to-date about any investigation results as well.

FCRA: Complex For Landlords

Being able to put into action all of the tenets of the FCRA can be complicated for landlords. Even the most well-meaning landlords can accidentally violate the rules of this act, and that is why many landlords choose to outsource their tenant screening.

By choosing a reliable and fair tenant screening service, landlords can simplify their screening process while being sure that they are in keeping with the FCRA rules.

Common FCRA Background Check Issues

Despite the best efforts by good landlords to follow FCRA, there are a number of FCRA issues that you may commonly encounter. This is largely due to the way that many background check companies work. Learn more about why you need to be cautious in choosing the right tenant screening services.

Most FCRA Background Check Companies Are Robots

The fact is that most FCRA background check companies are only providing database information generated by their search “robots.” If you’re unsure exactly what your provider is doing, then you should prepare for problems immediately.

This causes issues because databases and credit reports are filled with errors.

Automated software simply passes those errors onto the end user, exposing you to a potential lawsuit.

Determining If Your Background Check Company Is FCRA Compliant

One thing you will never hear most FCRA background check companies tell you is where they get their data and information.

Most, if not all, FCRA background check companies (and even pre-employment screening companies) get all of their information from the same databases and sources.

So you’re probably thinking, what separates one company from the next?

Most background check providers will instantly generate these reports and hand them back to their clients.

There is a lot wrong with this scenario:

  1. What if you typed in the wrong SSN or name? Whose report did you just run—and pay for?
  2. What if the records on the report aren’t legally reportable? Do you know the FCRA laws for every state to make the decision?
  3. What if you denied an applicant for information that wasn’t even his or hers? Are you ready to take on a lawsuit?
  4. The company simply IS NOT a real tenant screening company, period.

The best way to find an FCRA compliant background check service is to simply check out the company’s report completion process.

Since most companies don’t disclose that information anyway, the second-best way is to look at their completion times.

If they claim their reports are instant, that’s a red flag right there.

However, most good background check services will offer some sort of FCRA interpretation on their instant reports.

You’re Better Off Not Getting A Background Check At All

Most companies running a background check are doing so for employment or tenancy.

It’s extremely easy for a denied individual to file a complaint against an employer or landlord based on false information supplied in a background check.

The fines for a first-time offender of the FCRA are $3,895 as of 2018.

If you aren’t absolutely sure that the background check services you are using are going to be FCRA compliant, there is no reason to risk that kind of fine. A fine that large can set you back for months, and it will leave a black mark on your record as well.

You have two options as a landlord: Either stop running background checks, or take the time to ensure you are using a company that will follow FCRA guidelines. Since tenant screening is an essential part of finding rental business success, the latter option is likely the better choice.

FCRA Compliant Background Check Companies

FCRA Compliant Background Check Companies

In the rental real estate world, screening reports, credit checks, and other aspects of background checks are essential. These reports help ensure that you are choosing the best tenant for your property among all the applicants, and they help you to set expectations for your business.

However, the stress of finding FCRA compliant background check companies is real. Thankfully, our services here at RentPrep are consistently updated to remain up-to-date with the latest FCRA guidance.

Fidelis Screening Solutions is the parent company of RentPrep, and we perform thousands of FCRA compliant background checks every month.

Even if you are a large employer or a property manager running background checks in bulk, we can work on a custom quote for your needs! Our goal is to make your work easier, and we can work with you to figure out just how to make that happen.

If you’re an employer looking for a quote, you can call our office at (888)877-8501 or email our Business Development Manager (Richard Fronczak) at rich@rentprep.com so that we can directly assist you.

If you’re a landlord or property manager with more than 100 units, you can call our office at (888)877-8501 or email us for a custom quote here. Our business is helping you run your own business even better. Are you ready to see that kind of difference in your work?

What Makes Us FCRA Certified?

We educate all of our employees on the laws of the FCRA.

Each employee undergoes a two-week training process at the time of hiring, which culminates in an FCRA compliance exam.

Once an employee passes this exam, they receive the designation of FCRA Certified Screener.

When you order a report through Fidelis Screening Solutions or RentPrep, an FCRA Certified Screener will hand-compile your report. We cross-reference multiple databases to remove errors, fix omissions, and combat database errors.

Unlike our competitors who send out instantaneous reports full of inaccurate information, we ensure that you are getting the best knowledge in a fair and legal way. Our reports are not instant because an additional layer of FCRA compliance is added to each one.

We want you to be able to do your business quickly, but we also want you to know that you are following the letter of the law. This ensures that your business can proceed smoothly, without the legal issues that can result from ignoring FCRA guidelines.

FCRA Tenant Screening Non-Compliance Penalties

The FCRA allows applicants to sue landlords in federal court for damages. If they win, you will most likely be responsible for all court costs and legal fees. If they can prove that you deliberately violated the FCRA, they can also seek punitive damages.

The Federal Trade Commission (FTC), along with the state, can sue you for not complying with the FCRA and can even be awarded civil penalties. This can all be avoided if you, the landlord, can prove that you maintained reasonable procedures to assure FCRA compliance.

Using an FCRA tenant screening company to review and interpret background check reports is not only the first step, but it’s also the biggest one you can take. Having someone educated on FCRA on your side is going to add a significant layer of protection from these types of problems and lawsuits.

Getting The Best FCRA Background Check And More

When you’re seeking FCRA tenant screening services for your rental real estate, you want to be sure that you have a reliable company on your side. Not only do we offer FCRA-trained screeners at RentPrep, but we’re also here to help you cultivate the best tenant screening practices.

Everything from tenant background checks to credit checks to credit reports can be purchased through our top-tier Tenant Screening Services. Learn more today!

FCRA Compliant Background Check FAQs

What background check do landlords use?

When landlords run screening reports, what each landlord uses might vary. Rental background checks can include a variety of information, and the specific information gathered by any landlord is going to depend on what their tenant screening practices look like.

Landlords who are looking to do a very thorough background check will usually gather all of the following information on the rental application and in any background checks that they order:

  • Credit score
  • Address and employment history
  • Tradelines and collections
  • Consumer statements
  • Credit inquiries
  • Public records
  • Eviction records
  • Criminal records
  • AKAs (other names used)

Depending on what type of tenant screening company you hire to do your screening, you might get only some of this information. It is your choice what type of information you believe is most important for choosing tenants. Remember, however, that you can only use information that you know to be accurate and fair when choosing tenants.

Otherwise, you might face an FCRA violation. Be sure that you are only using information for its permissible purpose when selecting between prospective tenants.

What is the best credit check for landlords?

When you want to screen a prospective tenant for their credit worthiness, you might wonder what type of credit check is going to be the right option.

Some tenant screening services give you the credit score and nothing more; others give you a suggestion of whether to approve or deny but do not give you the exact score. Which type of credit check works best for your business depends on how you prefer to receive information.

Most of the time, the biggest benefit of using a screening service developed specifically for landlords like RentPrep is that the screening service will only show you financial information that you are legally allowed to use for tenant screening. If there is information in the full credit report that should not be used when making your decision, that information will be filtered out.

This is why working with an FCRA compliant tenant screening company is so important. The fines are incredibly steep for violating these rules, so be sure that you are choosing a screening service that has your best interest in mind.

Does FCRA apply to criminal background checks?

Though many people believe that the FCRA is only relevant to credit history, the rules of this check actually extend to criminal history, eviction history, and other types of background check. Background checks for a permissible purpose, such as determining housing or giving a loan, may take a criminal background check into account.

As these background checks are still consumer reports related to the granting of a specific product, the guidelines of the FCRA still apply.

How far back do FCRA background checks go?

There are different rules on how far back background checks can go, depending on the type of background check as well as the state where the check is done.

When it comes to federal FCRA guidelines, there are specific rules about what can and cannot be reported. Reporting agencies may not include the following in their reports:

  • Bankruptcies and Title 11 filings older than 10 years
  • Civil suits and judgments older than seven years
  • Arrest records older than seven years
  • Paid tax liens older than seven years
  • Collections older than seven years
  • Negative or adverse information older than seven years

This limits how much a prospective tenant’s past can affect their current housing situation. It is important to remember that if you accidentally come across this information, you cannot use it to make a decision about whether or not to accept a tenant to rent your real estate. Doing so would be a violation of the FCRA.

What causes a red flag on a background check?

When running a background check, you are typically looking for any red flags that indicate the applicant is either dishonest or unreliable. For example, a tenant who lies about their employment is probably not going to be a good fit for renting your property.

There are many different things that landlords should look out for when choosing tenants, but these are some common red flags that may show up on a background check:

  • Low credit score
  • Violent criminal record
  • More than three recent convictions
  • Many outstanding collections

There is a large variety of information that can come from a background check. When that information suggests a tenant won’t be able to deal with the responsibility of renting your property, it’s best to move forward with another candidate.

Move Forward With FCRA Compliant Background Checks

Make sure that every background check you do is an FCRA compliant background check by choosing only screening services that are experienced with FCRA compliance. While you want to be able to properly vet and choose among every prospective tenant, you can only do this within the rules laid out by FCRA on consumer reports.

While this can all sound very complicated, top FCRA tenant screening services like RentPrep help ensure that you can integrate compliance easily. Don’t wait to add compliance to your priority list. You could be risking a big fine if you do that. Instead, focus on learning more today!

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