13.1. How To Properly Reject An Applicant

If you screen your prospective tenants carefully, you will need to reject many of them. The key is to do it right, incurring as little ire as possible and without tripping over the Fair Credit Reporting Act and your state and federal anti-discrimination laws.

The best way to reject an applicant is to say so, directly, at the point at which the decision to reject is made. Cloaking the painful truth does not insulate you from any liability. Nor does it ease the disappointment the applicant may feel. Such a route can only lead to argument and hard feelings. But that is not the end of your responsibility. Beyond letting the prospective tenant know, unequivocally, that he has not been accepted, you must, under the law, let him know certain other things. 

In some instances, the information on which the adverse action is based need not have come from the credit report. An adverse action is defined in the FCRA as an outright denial, or a demand for more security, or any other increased burden to the prospect, in order to be approved. An example of this last might be the demand for an increased security deposit, or prepayment of several months rent, to compensate for greater perceived risk from a tenant who has undergone an eviction.

The exact course of action the landlord must take depends on the source of the information that leads to the adverse action. There are three possible sources of such information:

1. Credit reporting agencies,

2. Third parties which are not credit reporting agencies, and

3. Internal records or records of affiliates.


If the landlord takes adverse action in response to information in a credit report, then 15 USC 1681m(a) specifies:

If any person takes any adverse action with respect to any consumer that is based in whole or in part on any information contained in a consumer report, the person shall;

  1. Provide oral, written, or electronic notice of the adverse action to the consumer,
  2. Provide to the consumer orally, in writing, or electronically
    1. The name, address, and telephone number of the consumer reporting agency (including a toll-free telephone number established by the agency if the agency complies and maintains files on consumers on a nationwide basis) that furnished the report to the person; and
    2. A statement that the consumer reporting agency did not make the decision to take the adverse action and is unable to provide the consumer the specific reasons why the adverse action was taken; and
  3. Provide to the consumer an oral, written, or electronic notice of the consumer’s right
    1. to obtain, under section 1681j, a free copy of a consumer report on the consumer from the consumer reporting agency referred to in paragraph (2), which notice shall include an indication of the 60 day period under that section for obtaining such a copy; and
    2. to dispute, under section 1681i, with a consumer reporting agency the accuracy or completeness of any information in a consumer report furnished by the agency. If the reporting agency does not provide an appropriate notification letter to the applicant, you may use the following language in any form letter:
    3. “We regret to inform you that your application to rent 1234 Main Street has been declined. This action was in whole or in part the result of information contained in a credit report. This report was supplied by TransUnion SMART MOVE Network, 1810 Broad Ripple Ave 2A, Indianapolis, Indiana 46220, 1-800-249-4399. TransUnion did not make the decision to take this adverse action and is unable to provide the specific reasons why the adverse action was taken. You have a right to obtain a free copy of a report by making a written request on TransUnion within 60 days of your receipt of this letter. You also have a right to dispute with TransUnion the accuracy or completeness of any consumer report furnished by them.”

Despite what the federal code says, the landlord should make the disclosure in writing, in hard copy, never orally or electronically alone. Nothing can substantiate compliance more effectively than a hard copy of a letter with the notation “mailed 4/29/00.” The landlord should do this disclosure whether or not he has discussed the adverse action and the contents of the report informally with the applicant.

Because no one ever likes to hear bad news, and because of the possible emotions involved, I do not recommend that you inform an applicant of denial, in person or over the phone. 

Instead, use a letter (see below). If you do talk to the applicant, inform him that his “app is being processed” or that he will “be receiving a letter in the mail.”

TIP: Keep the application, credit report, notes, and a copy of the denial letter your files and backed up in the cloud.  If the tenant complains to HUD and an investigator contacts you, you will need this documentation to prove that you did not discriminate.

See our other articles in the tenant screening section on developing and applying qualification standards for applicants. Hopefully, you will never need it.


How does a landlord choose between several applications received within a short time frame, all of which satisfy his minimum requirements for qualification for the rental unit, and what does the landlord tell the applicants when he has made his choice? Four or five written applications with checks for holding deposits and credit check fees may have been received during a Sunday afternoon of showing, for example, and now the landlord must choose among them on Monday morning. The choice must be made in such a way as to avoid both the actuality and appearance of fair housing law violations. 

Keep in mind what fair housing laws are designed to do. They are designed to prevent you from discriminating against applicants on prohibited grounds.

These are usually race, creed, color, sex, handicap, etc. Your job is to select the best applicant. Your task is to not allow their status to enter into your decision making process.

There are two approaches. 

1. First come, first served basis, so that the first in time gets the unit if his application checks out in the screening process, even if there is a better qualified applicant who came in later. 

2. Sort the applicants by the strength of the information on the application that is important to you, and select the first one whose information is verified.

The first way might seem to make sense, but it will often result in a less qualified applicant being selected.

I recommend the second approach. Remember, there is nothing in the fair housing law that prevents you from judging applications on the basis of their quality, as opposed to their rank in time. 

The next problem is, what do I tell the ones who do not get the property. This applies to whatever method you choose to select among them.

Obviously, if you check the first applicant, and in the course of doing it, you find his credit report is lousy, you send the appropriate letter. If the second applicant is selected, you are left with three who may well be fully qualified, but who will not get the apartment. You should always tell all the applicants you expect to have several applications, and that you will select them either on the basis of the strength of their application as they appear. 

If you have not considered their credit reports nor checked references on them, you do not have a federal fair housing or FCRA issue, except to tell them the basis for your decision in the hope of avoiding a complaint. Send them the following, with their earnest money check marked VOID over the signature, uncashed, in the envelope.

Thank you for applying for the rental house at __________________ last week.

As I explained, there were a number of applicants for the unit, and one of those ahead of you qualified for it. Enclosed, uncashed, is your check for earnest money. It has been marked void for safety reasons. Please be advised that we have run no credit report nor have we contacted any of your references. We wish you good luck in your search.

Keep it short and to the point. It’s OK to reject a member of a protected class, as long as you are not rejecting them because they are members of a protected class.

All you can really do is to adopt a rational and legal method of choosing among applicants, apply it, then keep good enough records to show how you did it. That is why I like TransUnion Smart Move. It takes the burden off me entirely.

13.3. Application Denial Letter

Date: _________________

Applicant Name(s):_________________________________________

Thank you for applying for: (Rental Address)________________________:

Regretfully, your application to rent the above described premises was not approved for one or more of the following reasons;

( ) Incomplete application, inaccurate or false information or unable to verify information provided by the applicant.

( ) Insufficient income or debt to income ratio to meet qualifying standard.

( ) Information was received from a person or company other than a consumer reporting agency. Under Section 315(b) of the Fair Credit Reporting Act you have a right to make a written request to us within 60 days of receiving this letter for a disclosure of the nature of this information.

( ) Adverse history of damage to other rental properties, references regarding relations with neighbors.

( ) Information was received from (name, address telephone and toll free telephone of provider). (name of provider) did not make the decision to take this adverse action and is unable to provide the specific reasons why the adverse action was taken. You have a right to obtain a free copy of a report by making demand on the provider within 60 days of your receipt of this letter. You also have a right to dispute with the provider the accuracy or completeness of any consumer report furnished by them. You have certain rights under federal law regarding your credit history.

During the sixty day period that starts now you have the right to receive a free copy of your consumer report from the consumer reporting agency marked above. That disclosure can be made orally, in writing, or electronically.

You have a right to dispute the accuracy or completeness of any information contained in your consumer report, as furnished by the consumer reporting agency whose name is checked off above. If you believe your file contains errors, is inaccurate or incomplete, call the consumer reporting agency at their toll free number listed above, or write to them at the address listed.

You may have additional rights under the credit reporting or consumer protection laws of your state. Contact your state or local consumer protection agency or a state Attorney General’s office.