Including All Applicant Screening Criteria in Tenant Selection Plans
Q We share our rental criteria with applicants but haven't disclosed what the minimum credit score required is. Are we supposed to share this minimum credit score?
A Yes. If your site is using a minimum credit score to determine eligibility, that information must be disclosed, notes HUD compliance expert Mark Chrzanowski. HUD requires that eligibility information be made available in the site's tenant selection plan.
According to HUD Handbook 4350.3, par. 4-5(C)(1)(d), the selection plan must describe the site’s "standards used to screen for information on drug related or criminal activity (including registration as a sex offender) and use of the EIV Existing Tenant Search, as well as the other screening activities implemented by the owner." The handbook further says that the plan must describe circumstances under which the owner may reject an applicant for occupancy or assistance [HUD Handbook 4350.3, par. 4-4(C)(1)(e)]." Besides communicating eligibility information with regard to credit history, you need to be mindful of some limitations when considering an applicant's credit history.
Lack of credit history. The purpose of reviewing an applicant's credit history is to determine how well applicants meet their financial obligations. And a credit check can help demonstrate whether an applicant has the ability to pay rent on time. It's important to note that although an owner may reject an applicant for a poor credit history, a lack of credit history is not sufficient grounds to reject an applicant [HUD Handbook 4350.3, par. 4-7(F)(2)(a)].
Standard for credit rating. A requirement for applicants to have a perfect credit rating is too strict a standard. As part of your written screening criteria, and in order to ensure all applicants are treated fairly, owners should describe the general criteria for distinguishing between an acceptable and unacceptable credit rating [HUD Handbook 4350.3, par. 4-7(F)(2)(b)].
Lookback period. A recent study published in Housing Policy Debate called “Locked Out: The Systematic Exclusion of Poor Renters from Federally Subsidized Housing” examined the admissions policies of 108 Rhode Island public housing agencies and privately owned Section 8 sites. The authors found these HUD-subsidized housing providers added criteria that may disadvantage many prospective low-income tenants. For example, in addition to mentioning felony conviction as grounds for denial, many used long lookback periods. On average, these providers examined 10.1 years of criminal history, 5.2 years of credit history, and 4.7 years of landlord history.
HUD says owners may determine how far back to consider an applicant’s credit history. But HUD notes owners generally focus on credit activity for the past three to five years. And HUD says it is good management practice to give priority to current activity over older activity [HUD Handbook 4350.3, par. 4-7(F)(2)(c)].