Landlords and Credit Reports
Authored By: Iowa Legal Aid
Landlords can look at your credit report when they are deciding whether to rent an apartment to you.
- Your credit report can be important when you are renting a home.
- Some landlords use background check companies to provide a special credit report that also includes your criminal history and eviction history.
- If a landlord turns you down because of bad credit or background issues, you may still be able to rent the apartment if you can explain some of the problems.
- Sometimes information on the report is incorrect. A common problem is when evictions that were dismissed are listed without a notation that the action was dismissed.
Landlords are legally allowed to use credit reports to evaluate rental applications, but they are required to follow the provisions of the Fair Credit Reporting Act (FCRA).
- If the landlord actually does a credit or background check on the tenant, the landlord can also make the tenant pay for the cost of the credit report.
- The FCRA protects the privacy of consumer report information and guarantees that the information in the reports is as accurate as possible.
- The FCRA requires landlords who deny a lease based on information in the consumer report to give the applicant an "adverse action notice."
What is a Consumer Report?
A consumer report has information about a person's credit, character, reputation, and lifestyle.
- It also may include information about rental history, such as information from previous landlords or from public records like housing court or eviction files.
- The FCRA only covers a report prepared by a credit reporting agency (CRA). A CRA is a business that puts together reports for other businesses.
- The three major CRAs in the United States of America are Equifax, Trans-Union, and Experian. However, there are many smaller CRAs that specialize in tenant background checks.
What is an Adverse Action?
An “adverse action” is any action by a landlord that is unfavorable to the interests of a rental applicant. These include:
- Denying the application to rent;
- Requiring the new tenant to have a co-signer on the lease;
- Requiring a deposit that would be waived for another applicant;
- Requiring a larger deposit than might be required for another applicant; and
- Raising the rent to a higher amount than for another applicant.
What is the Adverse Action Notice?
When an adverse action is taken that is based solely or partly on the consumer report, the FCRA requires the landlord to provide the applicant with a notice. The notice must include:
- The name, address and telephone number of the CRA that made the consumer report, including a toll-free telephone number for CRAs that maintain files nationwide;
- A statement that the CRA that made the report did not make the decision to take the adverse action and cannot give the specific reasons for it; and
- A notice of the consumer's right to dispute the accuracy or completeness of any information in the report, and the consumer's right to a free report from the CRA on request within 60 days.
This information is important because some consumer reports contain errors.
- The adverse action notice is required even if information in the consumer report was not the main reason for the denial, the increase in security deposit or rent or other adverse action.
- Even if the information in the report plays only a small part in the overall decision, the applicant still must be notified.
Sometimes a landlord's decision not to rent is based on information from a source other than a consumer reporting agency. In such cases, the law does not clearly say if notice must be given to you.
- Should a landlord refuse to rent to you and not say why, you may want to ask for the reason.
- If the landlord won't tell you why, you may want to talk to a lawyer to find out if you have the right to be told the reasons.
- You cannot force the landlord to change the decision even if it was based on wrong information.
- You can, ask the landlord to reconsider the decision after you provide the correct information.
- For example, you may have not paid a debt because you didn't think you owed the money, but the fact you did not pay the bill may be on your credit report.
- Perhaps the unpaid bills were for things other than rent.
- You could explain that you always paid the rent, but sometimes had to pay other bills more slowly.
The FCRA gives you the chance to know what the landlord found out about you. Then you have a chance to tell your side of the story.
What are the penalties for a landlord who does not comply with the FCRA?
Landlords who fail to give adverse action notices face legal consequences.
- The FCRA allows individuals to sue landlords for damages.
- A person who successfully sues is entitled to recover actual damages or statutory damages ($100 to $1000), court costs and reasonable attorney’s fees.
- The law also allows individuals to seek punitive damages for deliberate violations of the FCRA.
- In addition, the Federal Trade Commission (FTC), other federal agencies and the states may sue landlords for non-compliance and get civil penalties.
Under the FCRA, both the CRA and the information provider (that is, the person, company, or organization that provides information about you to a CRA) are responsible for correcting inaccurate or incomplete information in your report. To take advantage of all your rights under this law, contact the CRA and the information provider.
- Tell the CRA, in writing, what information you think is inaccurate.
- Include copies (NOT originals) of documents that support your position.
- In addition to providing your complete name and address, your letter should clearly identify each item in your report that you dispute.
- State the facts and explain why you dispute the information, and request that it be removed or corrected.
- You may want to enclose a copy of your report with the items in question circled.
- Send your letter by certified mail, “return receipt requested,” so you can document what the CRA received.
- Keep copies of your dispute letter and enclosures.
- CRAs must investigate the items in question — usually within 30 days — unless they consider your dispute frivolous.
- They also must forward all the relevant data you provide about the inaccuracy to the organization that provided the information.
- After the information provider receives notice of a dispute from the CRA, it must investigate, review the relevant information, and report the results back to the CRA.
- If the information provider finds the disputed information is inaccurate, it must notify all three nationwide CRAs so they can correct the information in your file.
When the investigation is complete, the CRA must give you the results in writing and a free copy of your report if the dispute results in a change.
- This free report does not count as your annual free report.
- If an item is changed or deleted, the CRA cannot put the disputed information back in your file unless the information provider verifies that it is accurate and complete.
- The CRA also must send you written notice that includes the name, address, and phone number of the information provider.
- If you ask, the CRA must send notices of any corrections to anyone who received your report in the past six months.
- You can have a corrected copy of your report sent to anyone who received a copy during the past two years for employment purposes.
If an investigation doesn’t resolve your dispute with the CRA, you can ask that a statement of the dispute be included in your file and in future reports.
- You also can ask the CRA to provide your statement to anyone who received a copy of your report in the recent past.
- You can expect to pay a fee for this service.
Tell the creditor or other information provider, in writing, that you dispute an item.
- Be sure to include copies (NOT originals) of documents that support your position.
- Many providers specify an address for disputes.
- If the provider reports the item to a CRA, it must include a notice of your dispute.
- And if you are correct — that is, if the information is found to be inaccurate — the information provider may not report it again.
About Your File
Your credit file may not reflect all your credit accounts.
- Although most national department store and all-purpose bank credit card accounts will be included in your file, not all creditors supply information to credit reporting companies: some local retailers, credit unions, travel, entertainment, and gasoline card companies are among the creditors that don’t.
When negative information in your report is accurate, only the passage of time can assure its removal. A CRA can report most accurate negative information for seven years and bankruptcy information for 10 years.
- Information about an unpaid judgment against you can be reported for seven years or until the statute of limitations runs out, whichever is longer.
- There is no time limit on reporting: information about criminal convictions; information reported in response to your application for a job that pays more than $75,000 a year; and information reported because you’ve applied for more than $150,000 worth of credit or life insurance.
- There is a standard method for calculating the seven-year reporting period. Generally, the period runs from the date that the event took place.
You may think your landlord, former landlord, public housing authority, or a consumer reporting agency has violated your rights. Iowa Legal Aid office may be able to help.
Iowa Legal Aid provides help to low-income Iowans.
To apply for help from Iowa Legal Aid:
- Iowans age 60 and over, call 800-992-8161.
- Apply online at iowalegalaid.org