How to Complete a FCRA Compliant Background Check on a Prospective Tenant

Nearly 90% of landlords report checking prior evictions, income, employment, rental history, credit scores, and criminal backgrounds when deciding whether to lease to an applicant.

While these are all standard steps in the tenant screening process, it’s more about running these checks the right way.

And when it comes to conducting a background check, doing it right means complying with the Fair Credit Reporting Act (FCRA), which sets specific rules for how you can obtain and use consumer reports in tenant screening.

If you rely on credit reports, criminal history, or eviction records from a third party in your tenant screening process, the FCRA applies. The good news? Compliance doesn’t have to be daunting when you follow a clear process.

We’re walking you through how to conduct an FCRA-compliant background check on potential tenants—step by step—so you can screen applicants the right way while reducing legal risk, treating people fairly, and documenting your decisions.

Quick Insights

• If you use a consumer report at any point in your screening process, FCRA rules apply. 
• Always provide clear disclosure and get written authorization from the applicant before you run an FCRA-compliant background check—no exceptions. 
• Work with a qualified CRA that follows FCRA accuracy and dispute standards, but remember that compliance is still your responsibility. 
• If you want to apply new conditions to an application or deny an applicant, give them the report and at least 5 to 7 days to review it. 
• If your decision still stands, follow up with a final adverse notice. Include the required CRA details and explain the applicant’s rights. 
• Protect all applicant information throughout the process. Secure storage, limited access, and proper disposal are all part of staying compliant. 
• Treat compliance as an ongoing process. Regularly audit the process and update your policies to keep your screening processes consistent and defensible.

Understanding the FCRA and Its Role in Tenant Screening

The Fair Credit Reporting Act (15 U.S.C. § 1681) regulates how Consumer Reporting Agencies (CRAs) collect and share information, as well as how businesses use that data.

Congress introduced the FCRA to promote accuracy, fairness, and privacy in consumer reporting. The Federal Trade Commission (FTC) and the Consumer Financial Protection Bureau (CFPB) enforce it.

In tenant screening, the FCRA applies when you source a consumer report from a CRA. Consumer reports include:

• Credit score reports
• Tenant screening reports
• Background checks, including criminal background reports
• Eviction histories collected by third-party providers

The FCRA mainly cares about the accuracy of these reports, consumer privacy, and preventing housing discrimination.

Following a structured process is absolutely crucial here. You can’t simply pull a report, deny an applicant based on the results, and move on to the rest of your applications.

Instead, you need to obtain written permission from the applicant before even running an FCRA-compliant background check. Then, if you take adverse action, you must follow specific notice requirements, all while protecting applicant information throughout the process.

Here’s how it all works.

Step 1: Obtain Written Permission from the Applicant

Before you even think about running an FCRA-compliant background check, you need to track down written authorization from the applicant.

Why Permission is Required

The FCRA requires a crystal clear written disclosure to the applicant that you’re planning on obtaining a consumer report for screening purposes. You must also get the applicant’s written authorization before accessing the report. This is a non-negotiable legal requirement.

After all, applicants deserve to know what information you’re reviewing and how you may use it—plus, it proves your compliance with the FCRA and creates transparency.

What the Consent Form Should Include

Your disclosure and authorization to the applicant should:

• Clearly state that you may seek out a consumer report
• Identify the types of reports you might request (credit, criminal, eviction)
• Mention the applicant’s rights under the FCRA
• Include space for a signature and date

Always use clear language—not complex legalese. The consent form should stand alone and be easily understood.

Best Practices for Digital and In-Person Consent Forms

Electronic signatures are legal under federal law. If you collect tenant consent online, make sure you clearly present the disclosure before the applicant signs.

For in-person applications, keep hold of signed copies securely. And retain signed consent forms for every single applicant, not just those you approve.

Step 2: Choose an FCRA-Compliant Background Check Service

To minimize potential risk, you’ll want to find a service that runs secure FCRA-compliant background checks. Here are a few things to consider when vetting vendors.

What to Look for in a Background Check Service 

Firstly, your provider must qualify as a consumer reporting agency under the FCRA. Put simply, a CRA is a company that assembles or evaluates consumer information for third parties.

Look for a provider that provides detailed reports covering credit history, criminal background, and eviction records. The provider should also:

• Clearly states that they comply with the FCRA
• Follow reasonable procedures for detailed, accurate reporting
• Provide full documentation should you need to take adverse action
• Maintain strong data security standards

In the past, the FTC has taken enforcement action against CRAs that failed to guarantee accuracy or follow dispute procedures properly. So, carefully evaluating the right provider is in your best interests.

Recommended Tenant Screening Platforms

These popular platforms are commonly used in rental screening:

• TransUnion SmartMove
• Zillow Tenant Screening
• Experian Connect Tenant Screening
• RentPrep
• eRenter

When evaluating a provider, consider how easily they integrate into your workflow, what compliance support tools are included, and whether there’s a transparent dispute process. Strong customer support can also be a game-changer.

But remember, a compliant CRA supports your screening process, but it doesn’t replace your responsibilities.

Verifying the Compliance of Your Background Check Provider

If you’re unsure about your favorite background check provider’s compliance standards, review their data security and privacy policies and compliance documentation.

Then, confirm they provide the required Summary of Rights document issued by the CFPB for any adverse action steps you might take. It’s your responsibility to properly vet service providers—if they’re not compliant, neither are you.

Step 3: Notify the Tenant if Adverse Action is Being Considered

Rejecting an applicant based on a background check or credit score isn’t quite as simple as simply telling the prospective tenant they’ve been denied. If you’re not careful, this step in your tenant screening process could create risk.

What is Considered an Adverse Action?

An adverse action includes denying an application, requiring a higher security deposit, requiring a co-signer, or adding extra conditions based on information in a consumer report.

If a consumer report influences your decision to lease—even partially—the FCRA’s adverse action rules apply.

Providing a Pre-Adverse Action Notice

Before you settle on a decision, you must provide a pre-adverse action notice to the applicant, which includes:

• A copy of the consumer report
• A copy of the CFPB’s Summary of Rights under the FCRA
• Contact information for the CRA

Give the applicant plenty of time to review the pre-adverse action notice and to address anything mentioned in the report. We suggest waiting between 5 and 7 days, which is fair to the applicant and reduces legal exposure on your side.

Why This Step is Critical for FCRA Compliance

You may be thinking, “What’s the point of sending a pre-adverse action notice?” But remember, consumer reports aren’t perfect, and mistakes do occur.

The FCRA aims to give applicants a fair opportunity to correct any errors before you make a final decision on the lease. Skipping the pre-adverse action stage is one of the most common compliance failures property managers make, yet one of the easiest to avoid.

Step 4: Send a Final Adverse Action Notice (If Necessary)

If you ran an FCRA-compliant background check, and the applicant doesn’t dispute the report, or the dispute doesn’t change your decision, it’s time to send a final adverse action notice.

When to Send the Final Notice

You can send the final adverse action notice once the review period ends (usually 5-7 days) and you feel confident with your decision.

What to Include in the Adverse Action Notice

The final adverse action notice should include the name, phone number, and address of the CRA that performed the FCRA-compliant background check. It should also clearly state that you made the decision—not the CRA.

Always be straightforward and professional, avoiding vague explanations and industry jargon. The applicant should understand the decision and why you made it. You should also clearly outline their rights under the FCRA so there’s no confusion or room for interpretation.

Best Practices for Documenting the Adverse Action Process

Keep full records of everything involved in this process, including:

• The signed authorization
• The consumer report
• The pre-adverse action notice
• The final adverse action notice
• Any communications with the applicant

Pro tip: Use templates and checklists to standardize and streamline your FCRA-compliant background check process—consistency protects both your team and the business.

Step 5: Safeguard Applicant Information

Practicing compliance doesn’t end when you make a decision on a rental application. Moving forward, you need to protect applicant information as well.

Data Security Requirements Under the FCRA

The FTC’s Safeguards Rule requires businesses to protect the consumer information they store. After all, background reports contain sensitive information, including Social Security numbers and financial history.

Be sure to:

• Limit data access to authorized team members only
• Store reports in secure, encrypted systems
• Avoid sending sensitive data through unsecured email

How to Dispose of Background Check Reports Properly

When you no longer need the data, you must get rid of it securely. The FTC requires “appropriate measures” to dispose of sensitive information taken from consumer reports.

It involves shredding physical documents and permanently deleting electronic files. Throwing reports in the trash doesn’t count and isn’t compliant.

Preventing Unauthorized Access to Applicant Data

Organize role-based access controls in your property management systems to prevent unauthorized access to applicant data. Likewise, take the time to regularly train staff on data-handling policies and to review security procedures.

Strong data practices aren’t just about avoiding harsh penalties—they also build trust with applicants, which is invaluable for supporting long-term landlord-tenant relationships.

Step 6: Review and Update Your Screening Policies Regularly

FCRA compliance isn’t a one-off project. Compliance is an ongoing task that requires regular assessment and updates. 

Keeping Up with FCRA and State-Specific Regulations

First, understand that while federal law sets the foundation for regulatory compliance, state and local laws may impose additional requirements, especially regarding criminal history checks.

Regularly check in on regulatory updates and housing associations and seek legal advice if you’re unsure about new changes or how to incorporate them into your screening process. And update your written policies promptly when laws change.

Conducting Internal Audits

Make sure you regularly review your own compliance procedures to confirm everything is on track. For example, pull a sample of recent applications and check that each file includes all the required documents.

If you do make any changes to your policies and practices, document them.

3 Common FCRA Compliance Mistakes (and How to Avoid Them)

We’re only human—mistakes happen. Here are a few of the most common mistakes to look out for so you can avoid them before they become an issue.

1. Failing to Obtain Written Consent

Running a background check without the applicant’s written authorization is a clear violation of the FCRA. But the risk goes beyond just non-compliance.

Under the FCRA, applicants can sue for:

• Statutory damages
• Actual damages
• Attorney’s fees

To prevent this, build consent into your workflow so it becomes a standard part of your process. Use standardized disclosures and require signatures each time.

Configure your property management system so team members can’t organize a background check without documented authorization. And train your staff to treat this step as mandatory.

2. Skipping or Sending Incomplete Adverse Action Notices

Failing to send pre-adverse or final adverse action notices—or leaving out the right language or requirements—is a clear no-go.

If you deny or condition an application without following the proper steps, you take away the applicant’s right to review and dispute the report. That’s exactly what the FCRA is designed to prevent. And if you skip that step, it can make your entire decision process look unfair, even if your reasoning seems fair.

Use notice templates aligned with FCRA requirements and follow a checklist so you can always include everything you need.

3. Using Non-Compliant Background Check Services

Not all screening services operate with proper compliance procedures. Always vet providers carefully, confirming they qualify as CRAs and that they follow FCRA standards.

Remember, using a third-party vendor doesn’t take away your responsibility. If you work with a non-compliant service provider or inaccurate information leads to a dispute, your team’s still involved, and you can still be liable under the FCRA—fines, legal trouble, and more.

Build a Screening Process You Can Trust

An FCRA-compliant background check doesn’t have to be complicated, but it is precise. Always obtain written authorization and work with a compliant CRA. Follow the pre-adverse and adverse action process carefully, protect applicant data, and review your policies regularly.

When you apply these steps carefully and consistently, you prove fairness in your screening decisions and avoid legal hot water. Compliance protects your properties, residents, and reputation, while a structured process gives you clarity for your own sake.

Make sure your processes are just as strong as your compliance steps to avoid tenant scams or costly legal implications from non-compliance. Snappt can help you verify income, detect document fraud, and strengthen tenant screening from start to finish.