Yes, a landlord is allowed to obtain a credit report on a prospective tenant. If you are a landlord and you turn down an applicant because of negative information on a credit report, you must send the applicant an "adverse action" letter, which informs the applicant of three things:
To run a credit check, you'll need a prospective tenant's name, address, and Social Security number or Individual Taxpayer Identification Number (ITIN). You can order a credit report from a credit reporting agency, which will get the report from one of the three major national credit bureaus: Equifax, Experian, and Transunion.
Landlords are not required by law to use written rental applications. However, asking prospective tenants to fill out written applications can protect you from lawsuits filed by irate applicants whom you rejected as tenants.
For example, suppose you talk to six applicants before renting one of your units. You pick Applicant #3 because you feel he is most likely to reliably pay the rent. Two weeks later, you get a call from a lawyer representing Applicant #5, who claims she was discriminated against because she is Black and a single mother. If you aren't willing to pay $10,000 to settle the matter, you'll promptly be sued in federal court for $50,000.
Because you have no written documentation explaining how you picked Applicant #3, your insurance carrier proposes to pay the rejected applicant $10,000. After all, the insurance company points out, it looks bad that you picked a white male with no children, especially since it turns out that the Black single mother has a high-paying job.
Had you been able to produce all the candidates' comprehensive written applications, their credit reports, and references from previous landlords, the result would likely have been different. You would have had good written documentation supporting why you picked Applicant #3—his salary and job stability were far better than that of Applicant #5, who had only recently started her job and had a bankruptcy in her past.
For more information, see Choosing Tenants: Avoid Fair Housing Complaints and Lawsuits.
Federal fair housing laws specify illegal reasons to refuse to rent to a tenant, such as rejecting an applicant because of race, religion, ethnic background, sex (including gender identity and sexual orientation), or because the applicant has children or a disability.
In addition, some state and local laws prohibit discrimination based on a person's marital status, source of income, or age.
Landlords are legally free to choose among prospective tenants as long as their decisions comply with these laws and are based on legitimate business criteria. For example, a landlord is entitled to reject someone with a poor credit history, insufficient income to pay the rent, or past behavior—such as damaging property—that makes the person a bad risk. A valid occupancy policy limiting the number of people per rental unit—one that is clearly tied to health and safety—can also be a legal basis for refusing tenants.
Landlords must apply selection standards, such as requiring a minimum income and a good credit report, equally to all tenants.
The Fair Housing Acts prohibit landlords from taking any of the following actions based on race, religion, or any other protected category:
To learn more about attracting, screening, and selecting the best renters available, see Every Landlord's Legal Guide.
Savvy landlords should ask all prospective tenants to fill out a written rental application that includes the following information:
Before choosing tenants, you should check with previous landlords and other references; verify income, employment, and bank account information; and obtain a credit report. The credit report is especially important because it will indicate whether a particular person has a history of paying rent or bills late, has gone through bankruptcy, or has ever been evicted.
To avoid trouble with fair housing laws, be sure to be consistent and fair in your screening. For instance, make it your policy to require credit reports from all applicants. For more information, see Choosing Tenants: Avoid Fair Housing Complaints and Lawsuits.
There are many good reasons why landlords typically request that all prospective tenants provide their Social Security number (SSN). For one thing, you may need the Social Security number or other identifying information, such as a passport, to request an applicant's credit report.
But what if you encounter an applicant who doesn't have an SSN (given that only citizens or immigrants authorized to work in the United States can obtain one)? For example, someone with a student visa will not necessarily have an SSN. If you categorically refuse to rent to applicants without SSNs, and these applicants happen to be foreign students, you're courting a fair housing complaint.
Fortunately, people lawfully in the U.S. who don't intend to stay here permanently—and even people who are here illegally—can obtain an alternate piece of identification that will suit your needs equally to an SSN. It's called an Individual Taxpayer Identification Number (ITIN), and is issued by the IRS to people who expect to owe taxes.
Most people who are in the U.S. long enough to apply for an apartment will also be earning income while here, and will therefore have an ITIN. Consumer reporting agencies and tenant screening companies can use an ITIN to find the information they need with which to effectively screen an applicant.
Keep in mind, however, that an ITIN is not proof of legal status in the United States. The IRS does not research the taxpayer's immigration status before handing out the number.
If you're concerned about illegal housing discrimination, be sure you're aware of subtle actions that might constitute illegal discrimination, such as setting more restrictive standards for certain tenants.
While it's illegal to discriminate against a tenant based on national origin, landlords in most states are allowed to ask applicants for proof of identity and eligibility to work under U.S. immigration laws, such as a passport or naturalization certificate, using Form I-9 (Employment Eligibility Verification) put out by U.S. Citizenship and Immigration Services (USCIS). This form and instructions for completing it are available on the USCIS website.
While asking applicants to provide documentation of their citizenship status during the screening process and rejecting those who cannot provide such documentation, does not violate the federal Fair Housing Act, you may not selectively ask for immigration information—that is, you must ask it of all prospective tenants, not just those you suspect to be in the country illegally.
And as with most aspects of landlord-tenant law, there are exceptions to a landlord's ability to inquire about a prospective tenant's immigration status or citizenship: New York City, Colorado, and California, for example, prohibit landlords from asking such questions.
Keep in mind that some people who have the right to be in the U.S., such as some students, asylum applicants, and other temporary visa holders, might not have the right to work, which is the focus of the I-9 form. To confirm their right to be in the U.S., ask for a USCIS "receipt" or other document describing their status.
For detailed advice on choosing and screening tenants (and avoiding illegal discrimination), see Every Landlord's Legal Guide. Or, if your rental property is in California, check out The California Landlord's Law Book: Rights & Responsibilities.