Can landlords deny applicants with low credit scores?

Tenant Screening and Credit Score Considerations for Landlords in Washington State

When operating as a landlord in Washington, understanding the legal framework surrounding tenant screening is essential to making informed and compliant decisions. One common concern among landlords pertains to the role of credit scores in tenant selection: Can landlords deny applicants with low credit scores? This comprehensive guide clarifies the relevant rules and best practices within Washington State.

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The Role of Credit Scores in Tenant Screening in Washington

Washington landlords routinely use credit scores as part of tenant screening processes to assess an applicant’s financial responsibility and their likely ability to pay rent on time. A credit score provides an indication of past financial behavior, including debt repayment habits and presence of collections or bankruptcies.

Can Landlords Legally Deny Applicants Based on Credit Scores?

Yes. Washington landlords can deny tenancy to applicants with low credit scores, provided the denial is based on legitimate, non-discriminatory reasons and consistent screening criteria. The use of credit information is a common and accepted practice, but it must be conducted within the bounds of applicable state laws and federal regulations.

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Key Considerations for Using Credit Scores in Tenant Screening

1. Consistent Screening Criteria

Washington landlords should:

• Apply the same credit requirements uniformly to all rental applicants to avoid claims of discrimination.
• Establish clear, objective credit score benchmarks or guidelines prior to reviewing applications.
• Document how credit scores are evaluated and the reasons for denial to maintain transparency.

2. Compliance with the Washington Law Against Discrimination

While credit scores themselves are not a protected class, landlords must ensure that denial decisions do not disproportionately impact protected classes under Washington State law, which includes protections against discrimination based on race, color, national origin, sex, marital status, sexual orientation, gender identity, familial status, disability, honorably discharged veteran or military status, and other categories.

3. Fair Credit Reporting Act (FCRA) Compliance

The FCRA governs the use of consumer credit reports nationwide. Washington landlords must:

• Obtain written consent from the applicant before running a credit report.
• Notify the applicant if tenancy is denied due to information contained in their credit report.
• Provide an adverse action notice that includes the contact information of the credit reporting agency and a copy of the report, allowing the applicant to dispute inaccuracies.

Failing to comply with FCRA can result in legal penalties.

4. Consider Alternative Screening Factors

Sole reliance on credit scores might overlook mitigating factors such as:

• Recent improvements in credit history
• Evidence of steady income and employment
• Positive references from prior landlords or employers

Washington landlords may consider these elements alongside credit reports to develop a more complete understanding of an applicant’s reliability.

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Practical Steps for Landlords When Evaluating Credit Scores

1. Set Clear Credit Criteria: Define minimum credit scores or acceptable risk levels in written screening policies before reviewing applications.
2. Obtain Written Permission: Secure an applicant’s consent in writing before pulling credit reports.
3. Review Credit Reports Thoroughly: Look beyond the numerical score to understand debts, payment history, and collections.
4. Communicate Transparently: Explain to applicants your credit requirements and, if applicable, reasons for denial based on credit information.
5. Provide Adverse Action Notices: If denying based on credit, promptly send a written adverse action notice per FCRA guidelines.
6. Document Decisions: Keep detailed records of screening outcomes to demonstrate consistency and lawfulness.

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Special Considerations in Washington

Washington has several tenant protection statutes that landlords should keep in mind when screening:

• Ban-the-Box on Criminal History: While this doesn't directly impact credit score screening, Washington law limits when landlords can inquire about criminal history. Screening policies should be reviewed holistically.
• Limitations on Application Fees: Application fees must be reasonable and reflect actual costs of screening.
• Housing Assistance Protections: Landlords cannot discriminate against applicants based on source of income, including housing vouchers, which might impact how financial information is weighted.

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Summary

In Washington, landlords may deny applicants with low credit scores, provided that:

• Screening criteria are applied consistently and fairly.
• Decisions comply with state anti-discrimination laws.
• The procedures mandated by the Fair Credit Reporting Act are followed.
• Consideration is given to other aspects of an applicant’s financial and rental history.

By balancing credit score evaluations with a thorough and transparent tenant screening process, Washington landlords can protect their property interests while respecting applicants’ rights and complying with applicable laws.

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Should you require further assistance, consulting with a Washington-based attorney or property management professional specializing in landlord-tenant laws can provide tailored guidance for your specific situation.