How Landlords Learn Your Secrets: Special Credit Reports

Finding the perfect house or apartment to rent is pretty tough — you have to consider your budget, your commute, your needs and wants and even your credit report, which has become a standard part of the application process. But once you’ve put in a rental application, the landlord may also be scouring a specialty credit report for your rental history that judges your past performance and character as a tenant.

Some landlords use these renter’s reports to decide whether to rent to you. But how do you know what those reports say about you? Unfortunately, as a renter, it can be difficult to check your own residential or tenant history report until after your rental application has already been denied. By then, the rental property you wanted is gone.

The Rental Credit Reporting Companies

There are hundreds of sophisticated data companies collecting and selling this information to landlords. For most consumers, the information in a specialty renter’s report is more expansive and detailed than in a financial credit report like you can get for free once a year at AnnualCreditReport.com from the three major financial credit reporting agencies.

Specialty rental reports contain intimate personal information, including: property rental addresses for previous 7 years, rental payment performance history (i.e., on time, late, delinquent), average length of past rentals, pet ownership, cleanliness of living conditions, reason for renting (e.g., foreclosure or never owned a home), civil court records, criminal background check, financial credit reports, past evictions, tenant history scores and lease risk scores.

For landlords, there’s a financial advantage to purchasing these special renter’s reports about prospective tenants. But for renters, these reports may pose a significant threat to housing access and stability.

“The number one killer of rental deals is if you’ve had a prior problem with a landlord,” says Andrew Heiberger, the CEO of TOWN Residential, a Manhattan luxury real estate rental firm. A negative rental history, Heiberger added, “is the single worst blemish you can have.”

Your Rental Report Rights vs. Financial Credit Report Rights

As a general rule, a consumer’s application for a new rental or lease renewal is the only “permission” a landlord or property management company needs to pull a specialty renter’s report about the applicant. Consequently, consumers rarely know before submitting an application which tenant screening company a landlord uses.

The federal Fair Credit Reporting Act (FCRA) only requires landlords to disclose these renter’s reports after the information was used to deny the application or charge a higher price for rent. In that event, landlords must provide a formal “adverse action notice” letter that reveals the role of the rental report in the application decision and the contact information of the tenant screening bureau.

So, for most consumers, a rejected rental application is their first exposure to these tenant screening bureaus. The U.S. Supreme Court described this challenge for individuals in the case Safeco Insurance Co. v. Burr (2007), “It is the adverse action notice [denial or rejection letter] that generally triggers the consumer’s role. In the absence of such notice, there may be nothing to alert the consumer to check the report and no information as to how to check a report.”

A handful of localities have more stringent notification protections for tenants. For example, New York City requires landlords to post a sign in their property management office and clear language in the rental application disclosing the name of all consumer reporting agencies used.

The most powerful tools that all consumers have in this process are the legal rights to request a free annual copy of the report and to dispute any inaccurate information in the report. Federal law requires all tenant screening companies to have a toll-free telephone number for consumers to request their reports. (Companies are not required to have an online request option). In practice, however, the federal government has recently raised questions about whether some tenant screening companies are cutting corners in this responsibility.

The Watchdogs

In 2010, the Federal Trade Commission (FTC) settled charges with SafeRent, one of the largest tenant screening bureaus, for failing to respond to consumers’ requests for their files and failing to investigate consumers’ disputes about inaccurate information.In 2012, the Consumer Financial Protection Bureau (CFPB) issued a warning to specialty credit reporting companies that they “must follow the law and provide consumers with easy access to their free annual report. If the CFPB has reason to believe that companies are not following the law, we will take action.”

But regulating the tenant screening industry is a big job. The CFPB’s informal “List of Consumer Reporting Agencies” contains contact information for eight tenant screening companies. For comparison, the New York State Bar Association estimates there are approximately 650 tenant screening companies selling reports to landlords.

Here’s the CFPB’s list if you want to reach out to get your reports from some of the big players: