How to decline a prospective tenant based on credit or income

Question

When renting my properties, I have prospective tenants claiming their felt being discriminated aagainst because they were declined due to their credit score or income. Though I am free from such complaints since it's owner occupied property. I worry about this if I moved out. Here is my questions:

1. Is it legal to set minimum credit score, say 680? Can I disclose that to my prospective tenants before the application?

2. Is it legal to set maximum rent vs income ratio? I was recommended the ratio should be below 33%. Shall I disclose that to the prospective tenants before the application?

3. Do I have to give feedback to the prospective tenants immediately after I got the report? How long can I wait to give feedback?

4. Does anybody has suggestions on how the decline letter shall say? I notice the decline letters for job applications always word such as "not fit the position". Shall I adopt that as "not fit the property"？

Thank you!

Thomas S. · Answer

The statements made regarding the fact that I operate in Ontario are valid. Considering that every state has different landlord tenant regulations any advice provided by a landlord not in the state in question makes any comments as equally unreliable as mine. Before posting questions on a country wide (world wide) forum landlords first need to research their state landlord tenant regulations to determine how their state requires a landlord to act. A Illinois landlord should only consider remarks or advice from other Illinois landlords when requiring clarification on their state regulations.

Any landlord providing a response to a specific regulatory matter is only providing comments as to how they operate in their regulatory district. Landlords should not rely upon any advice provided by a landlord that is not operating within the regulatory district in question. All other posts are simply actdotal in nature.

Michele Fischer · Answer

Unless an applicant is really hounding us, we normally keep them in a holding pattern until we offer the unit, then tell all the unsuccessful applicants that we found a more qualified applicant.  Even though I feel very torn at times to give folks feedback so they can get access to better housing, we do not go into any details as to why the other applicants were stronger.  The more you talk, the more fodder you give them to argue or feel mistreated.

I have two laws related to this.

One is a state law that if we take application fees we have to disclose our criteria.  This is a good idea so applicants aren't wasting their money.  We do not charge application fees, so we only give vague guidelines on the application.

Second is a federal law that there is a formal form that has to be provided if the decline was based specifically on the credit report info.  I mail them out as needed and have never needed to do any follow up.  Here's how it reads:

Your rights under the Fair Credit Reporting Act and Fair and Accurate Credit Transactions (FACT) Act of 2003. (15 U.S.C. §§ 1681 and following.)

THIS NOTICE is to inform you that your application to rent the property at ___[rental property address]___ has been denied because of [select all that apply]:

[  ] Insufficient information in the credit report provided by

___[Credit reporting agency]___

___[Address, phone number, URL]___

[  ] Negative information in the credit report provided by

___[Credit reporting agency]___

___[Address, phone number, URL]___

[  ] The consumer credit reporting agency noted above did not make the decision not to offer you this rental. It only provided information about your credit history. You have the right to obtain a free copy of your credit report from the consumer credit reporting agency named above, if your request is made within 60 days of this notice or if you have not requested a free copy within the past year. You also have the right to dispute the accuracy or completeness of your credit report. The agency must reinvestigate within a reasonable time, free of charge, and remove or modify inaccurate information. If the reinvestigation does not resolve the dispute to your satisfaction, you may add your own "consumer statement" (up to 100 words) to the report, which must be included (or a clear summary) in future reports.

[  ] Information supplied by a third party other than a credit reporting agency or you. You have the right to learn of the nature of the information if you ask me in writing within 60 days of the date of this notice. This information was gathered by someone other than myself or any employee.

___________________  __________________________ Date  Landlord/Manager

Thomas S. · Answer

Derek be carful when making a decision to waive any requirements you have informed applicants of in advance. When you waive a requirement you will open yourself up to charges of discrimination and unfair business practices. The next applicant that does not also have that requirement waived can cry foul.

If you wish to be fixable you should state the general requirements that you have without being specific. You state that you consider credit score, income, rental history etc. without providing specific numbers. You then state that each applicant is screened on a individual bases. This allows you the ability to be flexible with your standards without waiving any requirements.

Often in this business it is not about being fair it is about being perceived as being fair while  covering your butt.

Jeff Gates · Answer

There is a structure to decline applicants based on the Adverse Action Letter. Most has been discussed here.

Matthew Kreitzer · Answer

There could possibly be some strange local rule or law that could limit a person's ability to discriminate based on the aforementioned categories, but there are most assuredly no federal laws. I would recommend seeking out a local landlord/tenant lawyer to review your business proposals with to make sure they conform with all local rules and regulations.

Jeff B. · Answer

Nice and simple for you, but as show above, like it or not, some of us have to follow State mandated procedures :sigh:

Kimberly H. · Answer

@Helen Lee What city is your rental property in?

In my experience, some people like to use the word "discrimination" when their feelings get hurt. If you try to be as nice as possible while delivering the bad news it can really help.  Make sure you have a written criteria that you stick to. You can absolutely have a minimum credit score requirement and rent to income ratio, pet policy, etc.

Helen Lee · Answer

Thank you! Very helpful to me

Derek Martin · Answer

My application has a cover letter listing all the rental requirements. There are many requirements, such as minimum credit score, min income, rental history, references, max number of occupants, pets, smoking, etc. (Make sure everything on your list is allowed under local, state and federal law). I review the requirements with each applicant before they apply. Many do not meet each requirement but still choose to apply. I can always waive a requirement if I want to accept the applicant. This is probably not a good habit to get into, but I can do it. If I wish to deny the applicant, I have a form letter that looks almost identical to my cover letter that again lists the requirements. I just check off which one the applicant did not meet and send them the letter.

Jeff B. · Answer

@Todd Plambeck  I'm sure he is.  The site is not just one locale (eg SoCal) but domestic continental USA, Territories and now  sprinklings of Europe too.

It's hard to make a "one size fits all" response with so many jurisdictions in play. I'm attempting to broaden my perspective and to qualify more comments which apply to a regional / state.

How to decline a prospective tenant based on credit or income

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