Tenant Application Screening and FCRA Compliance: A Texas Landlord’s Guide

Tenant screening is one of the easiest places for a landlord to step into federal and state liability without realizing it.

A pattern we see often: landlords who use the same boilerplate screening policy for every property, regardless of what protected classes apply or how the criteria interact with state and federal disparate-impact analysis. Tightening the screening policy once, in writing, with documented business justification, is one of the cheapest pieces of legal protection a landlord can buy. The Fair Credit Reporting Act (FCRA) governs how credit and background checks can be obtained and used. The federal Fair Housing Act limits how the results can be applied. HUD’s 2016 criminal-history screening guidance was withdrawn in 2025, but disparate-impact exposure under the Fair Housing Act continues. And Texas Property Code Subchapter L (§§ 92.351–.354) governs application deposits and fees. Most landlords use third-party screening services (TransUnion SmartMove, Experian RentBureau, RentPrep, and similar), but using a third-party service does not eliminate the landlord’s compliance obligations. This page lays out the FCRA framework, the Fair Housing Act overlay, criminal-history screening limits, and the documentation practices that protect landlords from screening-related lawsuits.

The FCRA framework

The Fair Credit Reporting Act, codified at 15 U.S.C. § 1681 et seq., governs the use of consumer reports, a category that includes credit reports, background checks, eviction history reports, and rental verification reports.

The FCRA’s core requirements for landlords:

• Permissible purpose. The landlord must have a permissible purpose for obtaining the report, typically the applicant’s written authorization for the report in connection with a rental application.
• Authorization. The applicant’s authorization must be clear and conspicuous, separate from the application itself in some cases, and signed by the applicant.
• Adverse action notice. If the landlord takes adverse action (denial, conditional approval with higher deposit, conditional approval with co-signer requirement) based in whole or in part on the consumer report, the landlord must provide a written adverse action notice to the applicant.
• Identity of consumer reporting agency. The adverse action notice must identify the consumer reporting agency that provided the report and explain the applicant’s right to obtain a free copy.
• Right to dispute. The notice must inform the applicant of the right to dispute the accuracy of the report directly with the consumer reporting agency.

Failure to comply with these requirements exposes the landlord to actual damages, statutory damages of $100 to $1,000 per violation, punitive damages in willful-violation cases, and attorney’s fees.

When to provide the adverse action notice

The adverse action notice must be provided when the landlord:

• Denies the rental application based in whole or in part on the consumer report.
• Conditionally approves the application with a higher security deposit, co-signer requirement, or other adverse condition based in whole or in part on the report.
• Charges a higher rent, requires a larger application fee, or imposes any less-favorable term based on the report.
• Refuses to renew the lease (in some readings) based on a new consumer report obtained for renewal purposes.

The notice can be provided orally, in writing, or electronically. Written or electronic notice is best practice because it creates a paper trail.

What the adverse action notice must contain

A compliant adverse action notice typically contains:

• The name, address, and telephone number of the consumer reporting agency that provided the report.
• A statement that the consumer reporting agency did not make the decision and is unable to explain the specific reasons.
• A notice of the applicant’s right to obtain a free copy of the report from the consumer reporting agency within 60 days.
• A notice of the applicant’s right to dispute the accuracy or completeness of the report directly with the consumer reporting agency.
• A statement of the applicant’s federal rights under FCRA (typically attached as the FTC’s “Summary of Your Rights Under the Fair Credit Reporting Act”).

Most third-party screening services provide template adverse action notices that meet these requirements. Landlords using these services should still verify that the notice complies with current FCRA requirements and is being delivered to applicants.

Fair Housing Act overlay

The federal Fair Housing Act prohibits discrimination in housing based on race, color, national origin, religion, sex (including sexual orientation and gender identity), familial status, and disability. This applies to screening criteria and screening processes:

Facially neutral criteria with disparate impact. Criteria that look neutral but disproportionately exclude protected classes can violate the Fair Housing Act under the disparate-impact theory recognized in the Supreme Court’s Inclusive Communities decision.

Criminal history screening. HUD withdrew its 2016 criminal-records guidance in 2025, but disparate-impact liability under the Fair Housing Act survives (Texas Dept. of Housing and Community Affairs v. Inclusive Communities Project, 576 U.S. 519 (2015)), so criminal-history screening remains a leading disparate-impact concern. Blanket bans on applicants with any criminal history have been found to disproportionately exclude minority applicants and to lack a substantial, legitimate, nondiscriminatory interest. Screening based on specific, recent, serious convictions is more defensible than blanket bans.

Income screening. Income-to-rent ratios that are high enough to disproportionately exclude protected classes can be challenged. The standard 3-times-monthly-rent ratio is widely used and generally defensible, but extreme ratios (5x, 6x) face more scrutiny.

Source-of-income protections. Texas Local Government Code § 250.007 bars Texas municipalities and counties from prohibiting a landlord’s refusal to lease because the applicant’s income includes federal housing assistance (such as a Section 8 voucher). Austin’s 2014 ordinance was preempted, and Dallas’s 2016 ordinance cannot reach Section 8 voucher holders (apart from a veteran carve-out under § 250.007(b)). So in Texas a landlord generally may decline a voucher for non-veterans. Section 250.007 reaches only federal-housing income; it does not preempt protections tied to other lawful income such as child support or SSI.

Familial status. Restrictions on children, occupancy limits below the federal 2-per-bedroom guideline, and amenity restrictions (e.g., no children at the pool) face Fair Housing Act scrutiny.

Criminal history screening: best practices

HUD’s 2016 criminal-records guidance was withdrawn in 2025, so the four-factor framework below is now best used as a litigation defense to a disparate-impact claim (which survives under Inclusive Communities, 576 U.S. 519 (2015)) rather than as a HUD mandate:

• Step 1, Has the criminal record actually been verified? Many “criminal history” hits are erroneous (wrong identity, expunged records, dismissed charges).
• Step 2, Is the conviction recent enough and serious enough to be relevant? Decades-old, low-level convictions typically do not justify denial under the Fair Housing Act.
• Step 3, Does the conviction relate to a specific tenancy concern? Property destruction convictions are more relevant to a landlord’s interest than, say, a conviction for a drug-possession offense from 15 years ago.
• Step 4, Has the applicant offered evidence of rehabilitation? A sound individualized assessment weighs evidence of rehabilitation.

Best-practice screening criteria typically:

• Look only at convictions, not arrests.
• Limit consideration to the past 5 to 7 years for most offenses.
• Consider only specific categories of offenses (violent crimes, property destruction, drug manufacturing, sexual offenses) rather than blanket bans.
• Provide a process for applicants to submit evidence of rehabilitation.
• Document the basis for any denial in a way that establishes the landlord’s individualized assessment.

Texas application deposits and fees

Section 92.351 and § 92.352 govern application deposits and application fees in Texas residential leases.

Application deposit. Money paid to hold the unit while the application is being processed. Must be refunded if the application is rejected. May be retained under the agreed terms if the application is accepted but the tenant decides not to lease.

Application fee. Money kept to cover the cost of processing the application, credit checks, background checks, administrative costs. Generally not refundable.

The application fee should reflect the actual cost of processing the application. Excessive fees can be challenged as unreasonable.

Bad-faith retention of application deposit triggers a $100 + 3x penalty plus attorney’s fees under § 92.354.

What the screening file should look like when a fair-housing complaint shows up

Most fair-housing complaints against landlords are not won at the underlying-discrimination stage. They’re won at the documentation stage. The HUD investigator or the private plaintiff’s lawyer asks the landlord to produce the screening file, and what comes back determines whether the case moves forward.

A clean screening file, when the complaint lands, contains:

• The written screening criteria, dated and in effect at the time of the application. Not the current criteria, the criteria in effect when the applicant applied. Criteria that have evolved over time should be retained with effective dates.
• The screening rubric or scoring sheet applied to each applicant, identifying the same data points: income verification, credit score, employment, rental history, and any criminal-history considerations. Same fields filled out for every applicant in the same period.
• Documentation of every applicant who was approved and every applicant who was denied during the relevant period, with the rubric for each. The absence of comparator data is what kills landlords in fair-housing cases. If you can’t show that the same criteria were applied to similarly-situated approved applicants, the discrimination claim survives summary judgment.
• The adverse action notice if applicable, with proof of timely delivery.
• Any individualized assessment notes if the landlord considered an exception. This is especially important on criminal-history denials, where individualized assessment of nature, time elapsed, and rehabilitation is the strongest defense.

A landlord with this file produces it in 48 hours and the investigation often closes without further action. A landlord without this file spends six months explaining why their decision wasn’t discriminatory, and the explanations don’t have to be wrong for the case to settle for $25,000.

The file is built at application time, not after the complaint arrives. Once the complaint is filed, you can’t build the file retroactively without creating worse problems.

Documenting the screening decision

Screening decisions should be documented in a way that establishes:

• The criteria the landlord applied (income, credit, criminal history, eviction history, etc.).
• The applicant’s specific scores or results on each criterion.
• How the decision was made, preferably by a written rubric that produces consistent results across applicants.
• The basis for any individualized exception (rehabilitation evidence considered, alternative income source accepted, etc.).
• The date of decision and the person who made it.

Consistent documentation is the strongest defense against disparate-impact and discrimination claims. A landlord who can show that the same criteria were applied identically to all applicants in a non-discriminatory way is in a much stronger position than a landlord whose decisions look ad hoc.

Common screening mistakes that lead to lawsuits

Skipping the adverse action notice. Most common mistake. Fixing this is free; getting sued for missing it costs thousands.

Using overly broad criminal history screening. Blanket bans on any criminal history are disparate-impact problems. Tailor the screening criteria.

Inconsistent application of screening criteria. Applying different standards to different applicants, even with non-discriminatory intent, creates evidence of discrimination.

Mishandling reasonable accommodation requests. Disability-related accommodation requests during screening (e.g., guarantor instead of higher deposit, longer processing time, ESA exception) require thoughtful handling, not summary denial.

Using outdated criteria. Criteria that were defensible 10 years ago may not be today. Periodic review keeps the screening framework current.

Failing to retain screening documentation. The landlord cannot defend the screening decision without documentation showing what criteria were applied and what the results were.

Penalizing source of income. Texas Local Government Code § 250.007 lets a Texas landlord decline a federal housing voucher (Section 8) outside the veteran carve-out, but protections tied to other lawful income (such as child support or SSI) are not preempted, so treat those income sources consistently where a local ordinance reaches them.