What is tenant screening?
Tenant screening is how a landlord decides whether an applicant is likely to pay rent on time, keep the unit in good shape and follow the lease. Most owners order a consumer report from a screening company, then weigh it alongside their own checks of income and past landlords.
The pieces are standard. How much weight each one gets is up to you, within the limits of federal, state and local law. The goal is a decision you can explain in writing and repeat for the next applicant.
- Rental application: identity, current and past addresses, employer, income and household members who will live in the unit.
- Credit report: payment history, collections and debt, usually pulled through a tenant screening company.
- Eviction and court records: past judgments for possession or unpaid rent.
- Criminal background check: only where state and local law allow it, and never as a blanket ban.
- Income and employment verification: pay stubs, offer letters, tax returns or bank statements.
- Landlord references: whether past rent was paid, notice was given and the unit was left in good shape.
What the FCRA requires of landlords
The Fair Credit Reporting Act lets a landlord pull a consumer report on a rental applicant because the applicant started the transaction. Under 15 U.S.C. 1681b(a)(3)(F), a user with a legitimate business need in connection with a business transaction initiated by the consumer has a permissible purpose, and the FTC confirms landlords may get reports on people who apply to rent or renew a lease.
You’ll certify to the screening company that you’ll use the report only for housing. Get the applicant’s signed authorization anyway. It’s clean evidence of your purpose, and many screening companies require it before they run a report.
Once you’re done with a report, the FTC’s disposal rule says you have to destroy it so it can’t be reconstructed: shred the paper and wipe the electronic files. Willful violations of the FCRA expose a landlord to actual damages or statutory damages of $100 to $1,000, plus punitive damages and attorney’s fees under 15 U.S.C. 1681n.
Adverse action notices under 15 U.S.C. 1681m
If anything in a consumer report leads you to deny an applicant or approve them on worse terms, you must give an adverse action notice. The FTC counts denying the application, requiring a co-signer, asking for a larger deposit than other applicants pay and charging higher rent as adverse actions.
The duty applies even if the report was only part of the reason. Oral notice is allowed, but the FTC calls written notice the best practice because it proves you complied. The CFPB, which shares FCRA authority, has flagged accuracy problems in tenant screening reports, which is one more reason the dispute right in the notice matters.
- A statement that you took adverse action based in whole or in part on the report.
- The name, address and phone number of the consumer reporting agency that supplied it.
- A statement that the agency didn’t make the decision and can’t explain the specific reasons.
- The applicant’s right to a free copy of the report if requested within 60 days.
- The applicant’s right to dispute inaccurate or incomplete information with the agency.
- If you used a credit score: the score, its range, its source and date, and the key factors that hurt it.
Fair housing limits on screening
Federal fair housing law applies to every step of screening in a building with five or more units, from how you advertise to how you apply income and criminal history rules. Our guide to the fair housing act for landlords covers protected classes, accommodations and HUD’s 2025 and 2026 changes on criminal records, so we won’t repeat it here.
The practical rule is to be consistent. Use the same criteria, ask for the same documents and review applications in the same order for every applicant. That makes a fair housing claim much harder to bring and much easier to defend.
State and local tenant screening rules
State and local law can cap what you charge for screening, require refunds and limit what you can ask about. The rules below are examples verified against the statute or the agency that enforces them, not a complete list, so check the state landlord tenant law guide for your building before you set a fee or criteria.
California’s rules changed most recently. Civil Code 1950.6 caps the screening fee at actual out-of-pocket cost plus the reasonable value of your time, with a $30 base adjusted for inflation each year since January 1, 1998. As amended by AB 2493 effective in 2025, you can’t collect a fee when no unit is available, and you must either review applications first come, first served under written criteria or refund the fee to applicants who aren’t selected.
| Place | Rule | Source |
|---|---|---|
| California | Fee capped at cost plus time, $30 base indexed to CPI; receipt itemizing costs; copy of the credit report within 7 days | Civil Code 1950.6 |
| California | No fee without an available unit; first come, first served review or refund to applicants not chosen within 7 days of selection or 30 days of applying | Civil Code 1950.6(c), as amended by AB 2493 |
| California | Landlord may choose to accept a reusable screening report prepared in the last 30 days; if you do, no screening fee | Civil Code 1950.1 |
| New York | Background and credit check fee is the lesser of actual cost or $20; waived if the applicant brings a check from the past 30 days | Real Property Law 238-a |
| Seattle | No denial based on arrest or conviction records, except adult sex offender registry information with a legitimate business reason | Seattle Municipal Code 14.09 |
| Cook County, Ill. | Criminal check only after an applicant prequalifies; only convictions from the past 3 years, with an individualized assessment | Just Housing Amendment |
How to write tenant screening criteria
Written screening criteria are a one- or two-page statement of what an applicant must show to be approved, handed out before you take an application fee. California’s first come, first served option and Cook County’s rules both call for written criteria, and everywhere else they’re your best defense if a denial is challenged.
Make the criteria measurable. “Good credit” is open to interpretation, while “no unpaid rental collections in the past three years” isn’t.
- Income: a stated ratio of gross monthly income to rent, and how you count co-applicants, guarantors and non-wage income.
- Credit: what you look at, such as rental collections or recent bankruptcies, rather than a single score cutoff alone.
- Rental history: required references and what counts as a negative, such as an eviction judgment within a set number of years.
- Criminal history: only what your state and city allow, with a lookback period and an individualized review.
- Occupancy: a standard consistent with local code and fair housing guidance.
- Process: the order you review applications, what documents you need and how fast you’ll decide.
Worked example: income ratio math
The income ratio compares an applicant’s gross monthly income with the monthly rent. Say a unit rents for $1,850 and your criteria require gross income of at least three times the rent, which is $5,550 a month or $66,600 a year.
An applicant earning $62,400 a year makes $5,200 a month, a ratio of 2.81 times rent, so the rent would take about 35.6% of gross income. Under the written standard, the applicant doesn’t qualify alone. If your criteria allow combined income and a co-applicant earns $2,600 a month while the first applicant earns $3,400, the household makes $6,000 a month, or 3.24 times rent, and qualifies.
If you approve the first applicant only with a guarantor or a larger deposit and the credit report played any part, that’s an adverse action under the FCRA. You still owe the notice, even though you said yes.
| Applicant | Gross monthly income | Income to rent ($1,850) | Meets 3x standard? |
|---|---|---|---|
| Single applicant, $62,400 a year | $5,200 | 2.81x | No |
| Co-applicants at $3,400 and $2,600 | $6,000 | 3.24x | Yes |
| Minimum to qualify | $5,550 | 3.00x | Yes |
How screening quality affects NOI and sale price
The effects of screening show up in your numbers as bad debt, legal costs and turnover, and those numbers decide what a buyer will pay. Take a 24-unit building with average rent of $1,850, or $532,800 a year of gross potential rent.
If loose screening leads to two problem tenancies a year, and each one costs $8,500 in unpaid rent, legal fees and turnover, NOI drops by $17,000, about 3.2% of gross potential rent. At a 6.5% cap rate, that’s about $261,538 of lost building value. The eviction process guide shows how quickly one nonpaying unit adds up.
Buyers see all of this in the trailing 12 months, the delinquency report and the tenant estoppel certificates. A clean rent roll with low delinquency is one of the easiest ways to support your price.
Tenant screening in a 5+ unit apartment building
In a building with five or more units, screening is a system, not a single decision. Every leasing agent, manager and owner should use the same criteria, the same screening company and the same notice templates. Every file should show what was checked and why the applicant was approved or denied.
Keep applications, authorizations, criteria versions and adverse action notices for each unit. When you sell with tenants in place, a buyer’s due diligence often asks how tenants were screened, and an organized file answers that in a day.
Selling your apartment building to Skyline
Skyline Capital Investments buys apartment buildings with five or more units nationwide, with tenants in place, including buildings with high delinquency or tenants you didn’t screen yourself. We can work with 1031 exchange timelines or offer seller financing terms.
Send the address and unit count through the form on this page or call (469) 660-2977. We typically respond within 48 hours.
