Inaccurate screening reports are driving moving costs for renters even higher, according to a new report by the Consumer Financial Protection Bureau.
From January 2019 to September 2022, the CFPB received approximately 26,700 complaints related to tenant screening. About 65% of them were related to incorrect information appearing on their reports.
Tenants often pay an extra fee for their own background checks and are not reimbursed if they are denied housing, even if the reason they are rejected is false. If you're applying to apartments repeatedly, these fees can add up quickly.
The problem is pervasive, says Eva Rosen, an associate professor at Georgetown University who studies the intersection of poverty and American housing policy.
"It's very common to have incorrect information on these reports," she says.
Landlords often use application fees to run background checks on perspective tenants. The average fee is between $40 and $59, but almost 10% of renters reported application fees more than $100.
This might seem minute compared to the price of moving as a whole – the average cost to move a 2 to 3 bedroom apartment in the United States is $1,250, according to Moving.com – but renters are reporting that they've had to submit applications over and over again after being denied for reasons that aren't revealed to them. Later, they'll find out the report wasn't even inaccurate. Soon, $50 fees start to add up.
Screening reports are typically sent directly to landlords. Tenants rarely receive a copy. The report can include:
- identity verification
- income and employment verification
- credit reports and scores,
- criminal record checks
- eviction records
- rental payment history
- bankruptcies and other civil judgments
- information from sex offender registries and the national terrorist watchlist
Many of those who filed a complaint with the CFPB say at least one one of these was inaccurate and led to them being denied housing.
One testimonial given to the CFPB says they were denied due to his credit report which was his twin brother's, not his.
Another said they were denied because their report listed a felony charge which they didn't have. They could not have a felony, they said, because they were an active-duty soldier.
Screening reports are constructed by third-party data aggregators. Typically, a landlord will ask for your name and maybe your social security number and then an algorithm will scrape the internet for the information requested.
But data entry is prone to errors, Rosen says. Lots of information on the internet is outdated or erroneous. Take eviction, for example. There is a difference between being asked to evict and actually being evicted.
"A vast majority of eviction filings in any particular jurisdiction don't end up resulting in executed evictions," she says. "That's very rare."
"It's common for tenants to pay up to the minute, or the hour, on the day the sheriff is supposed to come," Rosen says.
That eviction filing, though, stays on record. Even if it's expunged or sealed these data collection aggregators will pick up on it and put it in the report.
And there is no legal obligation for them to report it being sealed.
"It's this bizarre loophole," Rosen says. "These record-sealing bills that have passed actually don't have a lot of teeth to them."
Criminal records are often misclassified, too. Many tenants told the CFPB their misdemeanors were wrongfully listed as felonies.
The opacity of the process is a big frustration for renters.
"In their complaints, applicants described spending hundreds of dollars in application fees due to repeated denials by landlords in response to negative information contained in their reports," the CFPB report reads.
"Most interviewees did not know what information went into tenant screening reports and did not understand the impact on their rental prospects."
But oftentimes when you're looking for a place to live, you don't have the time to probe your landlord. You'll simply apply to another apartment and hope for the best.
"Landlords are going to be stricter in more affluent, more resourced areas and less strict in poorer, more disadvantaged areas," Rosen says.
"This kind of process is something that contributes to sorting people into more or less disadvantaged communities."
Want to earn more and work less? Register for the free CNBC Make It: Your Money virtual event on Dec. 13 at 12 p.m. ET to learn from money masters like Kevin O'Leary how you can increase your earning power.