How Can I Legally Screen Rental Applicants?

It's important to check a tenant's credit, background, and rental history to avoid trouble in the future—but make sure you're aware of the laws that apply to tenant screening.

For landlords, tenant screening describes the process of checking into a potential tenant’s background and finances before agreeing to rent to them. It’s important that you’re thorough—as soon as you sign a lease, your new tenant has certain rights, including the right to a formal eviction. That means that, even if they stop paying rent immediately, you can’t just kick them out. You’ll have to take them to court and wait for a judge to rule that you’re allowed to evict them—a process that can take months and cost thousands of dollars in legal fees.

Your screening process can be relatively informal—for instance, creating a short set of questions to ask applicants. Or, it can be more rigorous—paying for official reports created by third-party companies that dig into a potential tenant’s rental history and financial health. You can also create different sets of criteria for different units. What’s most important is that your process is clear, thought-out, and applied consistently to every single applicant.

What should I ask for in a rental application?

A rental application is a form that requests certain personal information about a potential tenant. You’ll need applicants to fill these out in order to check their credit or income. An application doesn’t guarantee a renter anything—it’s a non-binding form that allows you to collect information. Although every landlord’s rental application is different, there are certain things you should definitely ask for, including basic contact information and up to five years of previous addresses.

How much can I charge in application fees?

Most landlords also require tenants to pay a fee when they submit their rental application. This is known as the application fee, and it’s intended to cover the cost of screening a tenant (things like credit checks, etc). A lot of states regulate application fees to ensure that unscrupulous landlords don’t charge exploitative fees to applicants to try and make money off the application process. Some states won’t even allow you to charge an application fee until you can provide the receipts for what you used the money for.

Even if your state doesn’t regulate application fees, they’re meant to cover the cost of screening a tenant. So figure out how much it costs to run a credit/etc check, and how much time it takes you to call previous landlords, and charge something around there.

What criteria should I use to screen tenants?

There are four major components to the tenant screening process. Spend the time to formalize a set of policies and practices, making sure that it doesn't violate any federal or local laws about why you can't or can reject a tenant then share your policies with applicants and tenants openly in order to protect yourself from discrimination claims.

Rental history: Do they have a history of evictions? What kind of reviews do they get from previous landlords?
Income verification: How much money does an applicant make? Can they comfortable afford rent payments each month?
Credit report: What’s the applicant’s credit score? Do they have a history of making late payments?
Background check: Does the applicant have a criminal history? If so, are the criminal charges ones that would impact their behavior as a tenant?

Make sure to create specific criteria for each part of the process, write it down somewhere, and then apply it equally to every applicant. Otherwise, you’ll open yourself up to fair housing complaints.

What laws apply to the tenant screening process?

There are three main sets of laws that apply to the tenant screening process:

Fair Credit Reporting Act: This deals with credit reports and background checks that come from third-party companies. It also requires you to let an applicant know if you denied their application because of something in a third-party report.
Fair housing laws: The federal Fair Housing Act applies to every landlord in the U.S. and prevents rental discrimination based on things like race and gender. But many states—and even cities—have their own fair housing laws that expand on the protections offered by the national act.
State screening laws: Some states have specific laws that regulate how much you can charge in application fees or require you to make your selection criteria public. You should understand the rules in your state before you begin processing potential tenants.

Fair Housing Laws in the U.S.