What is an adverse action notice on a rental application?
Getting an adverse action notice after applying for an apartment can sound more alarming than it needs to.
In simple terms, it means a landlord took an action that was unfavorable to you and information from a consumer report played at least some part in that decision.
That might mean your rental application was denied. But a denial isn’t the only kind of adverse action.
The important part is what happens next. An adverse action notice gives you information you can use to understand what was reviewed, get a copy of the consumer report involved and challenge information that’s inaccurate.
What is an adverse action notice from a landlord?
Tenant screening reports are considered consumer reports under the federal Fair Credit Reporting Act, or FCRA.
If a landlord takes an adverse action based partly or entirely on information in one of those reports, federal law requires the landlord to notify you.
An adverse action can include:
Denying your rental application
Requiring a co-signer
Requiring a larger security deposit
Charging higher rent
Taking another unfavorable action because of information in a consumer report
The consumer report does not have to be the only reason for the decision.
For example, if a landlord considers both your income and information in a tenant screening report when denying your application, the adverse action requirements can still apply.
An adverse action doesn’t necessarily mean you were denied
This is one of the most important things to understand.
Imagine you apply for an apartment and the standard security deposit is $1,000. The landlord reviews a consumer report and says you can rent the apartment, but only if you pay a $2,000 deposit.
You weren’t denied.
But the landlord has still taken an action that is less favorable to you based on information in a consumer report. Under the FCRA, that can be an adverse action.
The same principle applies if a landlord requires a co-signer because of information in your report.
What should an adverse action notice tell you?
Under federal law, when the FCRA’s adverse action requirements apply, the notice must tell you about the unfavorable action and identify the consumer reporting agency that supplied the report.
It must include:
The name, address and phone number of the consumer reporting agency
A statement explaining that the consumer reporting agency did not make the landlord’s decision and cannot tell you the specific reasons for it
Notice of your right to dispute inaccurate or incomplete information provided by the consumer reporting agency
Notice of your right to obtain a free copy of your report from that agency if you request it within 60 days
Federal law allows this adverse action notice to be given orally, electronically or in writing.
If you receive it orally, it can be useful to ask the landlord to provide it in writing so you have a record of the information.
What if a credit score was used?
There are additional federal disclosure requirements when a numerical credit score was used in taking the adverse action.
These can include the credit score used, information about the score and the key factors that adversely affected it.
That’s different from simply knowing that credit information was part of your tenant screening report.
If a score was actually used in the adverse decision, look carefully at the information included with your notice.
The landlord made the decision, not the screening company
This distinction is easy to miss.
A consumer reporting agency gathers and provides information. Depending on the service, that information might include credit history, rental history, eviction records, criminal records or a screening score or recommendation.
The landlord or property manager makes the rental decision.
That’s why an adverse action notice identifies the company that supplied the report while also telling you that the reporting company did not make the decision.
If you want to understand why the landlord made its decision, that is a question for the landlord.
If you think information in the report is wrong, the consumer reporting agency is the company you need to contact to dispute it.
Colorado renters have additional rights after a denial
Colorado law adds protections when a landlord denies a rental application.
If your application is denied, the landlord must provide a written notice stating the reasons for the denial.
If your application resulted in the landlord obtaining a consumer report about you, the landlord must also provide you with a copy of that report and tell you about your right to dispute its accuracy with the consumer reporting agency.
If a proprietary screening system prevents the landlord from directly citing the specific screening criteria, Colorado law instead requires the landlord to provide a copy of the screening company’s report, with only proprietary information redacted.
The landlord must make a good-faith effort to provide the required denial notice no more than 20 calendar days after deciding to deny the application.
These Colorado requirements are important to distinguish from the federal adverse action rules. Federal adverse action protections can apply to unfavorable actions other than a complete denial. Colorado’s specific rental application provision described above applies when the application is denied.
I just received an adverse action notice. What should I do?
1. Read the notice carefully
First, identify what action the landlord took.
Were you denied? Asked for a co-signer? Offered the apartment with a larger deposit or higher rent?
Then look for the consumer reporting agency named in the notice.
2. Get your consumer report
If the landlord’s decision was based partly or entirely on a consumer report, federal law gives you the right to request a free copy from the consumer reporting agency identified in the notice.
You have 60 days after the adverse action notice to request that free copy.
If you’re in Colorado and your application was denied after the landlord obtained a consumer report, Colorado law separately requires the landlord to provide a copy of the report.
3. Check the report carefully
Don’t just look for something obviously negative.
Look for information that is wrong.
Check details such as:
Whether every record actually belongs to you
Names and addresses
Account balances and payment histories
Eviction information
Criminal records
Whether the status or outcome of a court case is accurate
Information that may be duplicated
Information that is outdated
Tenant screening reports can draw information from multiple sources. An error can be as consequential as a genuinely negative record if it affects how a landlord evaluates your application.
4. Dispute inaccurate information
If you find inaccurate or incomplete information, you have the right to dispute it with the consumer reporting agency.
Be specific about what you believe is wrong and provide supporting documentation when you have it.
For example, if a report incorrectly shows an eviction, documents showing the actual outcome of the case may help establish the error.
Disputing something because you disagree with the landlord’s criteria is different from disputing inaccurate information in the report.
The consumer reporting agency investigates the accuracy of its information. It does not decide whether a landlord’s rental criteria are reasonable or whether you should be approved.
5. Tell the landlord if you’re disputing an error
If you’re actively trying to rent the property, tell the landlord or property manager that you’ve found information you believe is inaccurate and that you’re disputing it.
That doesn’t require the landlord to approve your application or hold the apartment while a dispute is investigated.
But it makes clear that information influencing the decision may be incorrect.
6. Keep your records
Save the adverse action notice, screening report, emails with the landlord, your dispute and any documents you submit.
If the information is corrected, keep the results of that process too.
What an adverse action notice does not mean
Receiving an adverse action notice does not necessarily mean the information in your screening report is correct.
It also doesn’t mean the consumer reporting agency rejected your application.
And it doesn’t automatically tell you that you’ve violated a rule or done something wrong.
It tells you that an unfavorable rental decision was made and that information from a consumer report contributed to that decision.
That distinction matters because it gives you a next step: find out what information was used and make sure it’s accurate.
Why seeing your screening information earlier matters
One of the frustrating things about traditional tenant screening is that renters may not see the information being used until after something goes wrong.
You apply. A report is generated for the landlord. The landlord reviews it. Then you may discover an error only after receiving an adverse action notice.
Portable tenant screening reports can make that process more transparent.
With Rentell, you can see your screening information before deciding whether to share your report with a property manager. If something in your background information needs attention, you have an opportunity to understand it rather than discovering it for the first time after a rental decision.
That doesn’t change a property manager’s screening criteria or guarantee that an application will be approved.
It does give renters more visibility into information that can affect an important decision about where they live.
The bottom line
An adverse action notice isn’t just a rejection letter.
Under federal law, it can be required whenever information in a consumer report contributes to an unfavorable rental decision, including a denial, a larger deposit, higher rent or a co-signer requirement.
For renters, the notice provides something important: a path back to the information behind the decision.
Find out which consumer reporting agency supplied the report. Get your copy. Review it carefully. And if something is inaccurate or incomplete, use your right to dispute it.
If you’re renting in Colorado and your application is denied, you have additional state protections. The landlord must provide written reasons for the denial and, when it obtained a consumer report through your application, provide that report and information about your dispute rights.
The screening process shouldn’t require you to guess what information is being used about you.
This article is for informational purposes only and does not constitute legal advice.
