The process of finding the perfect rental house or apartment can range from hectic to nearly impossible. But it could be worse: Picture yourself locating that long-sought-after abode only to be rejected by your prospective landlord because of a negative report from a company you've never heard of.
Sound like a nightmare? For many Americans, it's all too real.
Of the approximately 37 million rental units in the U.S., 17 million are overseen by professional property managers. Many landlords, especially those who supervise multifamily apartment buildings, rely on tenant-screening bureaus to check the background of potential customers. These companies collect information from court records, police blotters, credit bureaus and other sources to help identify risky tenants before they become headaches.
Sounds reasonable, right? Unfortunately, because of the way these screening services collect and store information, responsible tenants can sometimes be branded as risky and can be at a serious disadvantage in tight rental markets.
As with nearly all money matters, one of the most important factors in determining whether you'll pass muster with a tenant-screening bureau is your credit history. Almost every bureau runs a credit check through at least one of the big three credit-reporting agencies: Equifax, Experian or TransUnion.
"They're going to look at consumer credit data," says Steve Katz, director of corporate communications at TransUnion, which acquired tenant-screening company RentPort in 2004. "They have to make sure that the individual has a history of being able to meet their financial obligations."
Blacklisting tenants
But credit reports are only part of the screening process. Tenant-screening bureaus collect information from a surprisingly wide range of sources, including utility companies, state governments and even clerks of court. One particularly controversial practice involves sifting through civil-court records and archiving the names they find, effectively creating "blacklists" of every tenant who has been involved in litigation with a landlord.
The country's largest tenant-screening company, First Advantage SafeRent, recently settled a case alleging that it had intentionally excluded the verdicts of tenant-landlord lawsuits in its tenant reports to landlords. The reason: The verdict, even if it showed the tenant to be clearly in the right, was irrelevant, according to SafeRent; that the tenants had been involved in a suit was enough to make them a serious risk for a prospective landlord.
"There is no way to keep yourself out of a database," says James B. Fishman, a New York attorney specializing in the rights of tenants and consumers. "If you try to enforce your rights under the law, then a landlord could retaliate and sue you, and that gets you blacklisted." A spokesman for First Advantage SafeRent declined to comment for this story.
Although the companies that create these blacklists are under pressure to change the way they do business, what they are doing technically is not illegal. In fact, many municipalities, including the city of New York, routinely sell records of tenant-landlord disputes en masse to any tenant bureau that wants to buy them.
"Nobody cared that they were gathering this information," Fishman says. "This only becomes a problem when they're using screening reports to deny apartments."
Criminal records checked, too
Another potential source of headaches for prospective tenants is the criminal background check. You may not sail as smoothly through the check as you'd expect.
Ideally, screening companies would use the states' CORI (criminal offender record information) systems to get a complete picture of an individual's criminal record. But because state governments usually charge a fee for access to these systems, screening companies may use arrest records instead. That means people charged with a crime could be red-flagged even if they were later acquitted.
"The police blotter is public information, but it doesn't tell you the disposition of the case," says Mac McCreight, a senior attorney with the housing unit of Greater Boston Legal Services. "The tenant will have to prove the disposition was positive, and sometimes that can be tricky."
Finally, like their credit-bureau brethren, tenant-screening bureaus have a tendency to mix up the records of people with similar names. "There can be identity issues that can be problematic," says McCreight. "Those with extremely common names can have problems." In other words, even if you've never done anything that would land you on a tenant-screening bureau's blacklist, being a John Smith or a Judy Jones might be enough to get your records scrambled with someone who has.
You are responsible
So what can prospective tenants do to prevent these screening snafus? It's a good news/bad news situation.
The good news: Most tenant-screening companies and tenant databases are willing to change inaccuracies or at least investigate them in order to comply with the Fair Credit Reporting Act, a federal law that requires consumer information collected by credit and tenant bureaus to be fair and accurate. If you file a dispute online or by phone, by law the credit bureau must answer it within 30 days, says Clifton O'Neal, director of public relations for TransUnion.
The bad news: The burden of finding and changing these inaccuracies and omissions is on the consumer. And by the time an error is corrected, your dream apartment probably will be long gone. "Everything else happens in the meantime, and the unit is rented out," says McCreight. "There's no link between correcting the information and the process being ground to a halt."
Under the credit-reporting law, consumers are entitled to a free copy of their consumer data from any tenant-screening bureau that considers itself a consumer reporting agency. First Advantage SafeRent gives instructions online on how to send for a free copy of your file.
The process for disputing bad information with a tenant-screening bureau is nearly identical to the process required to change incorrect information on a credit-bureau report.
So if you're looking to rent in a tight market, take a look at your credit report and contact a tenant bureau for a copy of your consumer file. A little bit of planning might prevent your perfect apartment from becoming the one that got away.
By Claes Bell, Bankrate.com
