I can’t remember if this HUD article was brought up previously. It’s from April 2024.

It strangely suggests everything that a land lord would use to screen is discriminatory and offers very little concrete guidelines. You really have to read it carefully to craft your criteria in selecting a tenant.

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hud.gov/sites/dfiles/FHEO/documents/FHEO_Guidance_on_Screening_of_Applicants_for_Rental_Housing.pdf

They state minorities are less likely to pay their bills on time. So it sounds like they are trying to say.

That when picking a new tenant. You should not count if they pay on time for anyone.

This also looks like it was made in April 2024.

Didn't read it all.

Their main take on credit scores is this:

"Given these significant and recognized limitations of credit scores as a predictor of likelihood to pay rent and given the disparities noted above, overreliance on credit history poses a significant risk of having an unjustified discriminatory effect based on race or other protected characteristics."

Basically, research is showing that credit scores are actually becoming less and less indicative of someone's likelihood to pay their rent and other bills. Therefore, they are arguing that it isn't a good guide to use to determine which applications to accept.

To be fair, that is likely an accurate point. We, as landlords, should take note: credit scores are getting less and less likely to predict ability to pay. So we should look at other financial information to determine that likelihood. (Which, again, is exactly what they say in the document.)

Even if we don't like it -- it is probably a good "heads up" to know that credit scores aren't predicting ability to pay like they used to. So use better financial data if available.

I don't use the score anyway, or the advice of the score-giver. I do use the details of the report. If they don't pay their rent or utilities, No. Other details I might not care about - it depends on amounts, length of time, etc.

There have been discussions on this forum with landlords coming to the same conclusion: Credit scores are not a great screening tool. It's much better to rely on the detailed information in the Credit Report. I've changed my own policy as a result.

Unfortunately, this FHEO guideline appears to lump credit scores, credit reports and credit history all into the same discriminatory boat:

"Because of these disparities, overbroad screenings for credit history may have an unjustified discriminatory effect based on race or other protected characteristics. HUD is

Quote: "HUD is unaware of any studies showing that credit reports and scores accurately predict a successful tenancy." Yes, that would be considered more common sense instead. Which one group of politicians no longer has.

Following the liberal logic. Next, they would say income discriminates. And you can't use that anymore. Since it also said anything that effects one group more than the other.

So maybe they were working up to other businesses besides landlords. Try telling banks this when they approve car loans or home loans.

Again, they are against "overbroad screenings for credit history." The same report flat out says that landlords can choose to use credit history.

Their point is that basing it just on score or having some hard rules about history likely don't give a good indication of their ability to pay, so you should look at additional financial data.

I think most of us agree with that. Once you consider what we already know, this report isn't nearly as bad as some want to make it out to be.

Does it seem biased? Sure, even to me. But their main point is that credit scores are not a good indicator of ability to pay -- and most of us agree with that. It also says that "overbroad screens based on credit history" might also not be a good indicator of ability to pay without looking at other financial data -- and I think most of us would agree with that also.

Bit of a nothing-burger, IMO. Those of us who know better about using credit scores and history already do what they suggest we do: consider other financial data.

But John, we are mostly tiny shops. A larger complex/complexes might want a faster process: first you screen out as many as possible, then you look hard at who's left.

So the "ACCEPT/DON'T ACCEPT" automated recommendations are one quick way to screen through multiple applications.

John,

But why not tell the banks the same thing if it does not mean much?

John,

May I respectfully ask what the specific financial data is that you use that is so different than a credit report? If you were talking to a new fresh very green Landlord who was your nephew, what info would you give him?---

I can usually understand your logic and thought process. On this, I think you are giving way too much benefit of the doubt. I see someone really bending over backwards to try to make what was written here make sense (even though you freely admit you yourself would not have written it like that).

My take is this is a lot more dangerous to property owners than you are willing to consider. This is very close to removing choice.

These extreme attempts to redefine discrimination are going to hurt everyone. Bad! I have done this once 20 years now. Don't even claim to be a master my any means, but I do know the biggest asset I have in my LL toolbox is ability to choose a solid person.

Every time I do that, life is easy. Details of the lease are followed, outside of emergencies, I am not bothered and I don't do any more bothering than necessary (maintenance inspections and when someone breaks).

This is awfully close to dictating that credit and finance altogether is a "bad" means of determining a tenant. I think you're fooling yourself to try and find special ways that HUDs claims are no big deal and stuff we should all have no problem with. I disagree. It's not perfect, but if a person can't pay bills and that's a part of their history, they are more likely to not pay bills again

If we lose the ability to choose based on financial considerations, evictions, criminal history, that will largely ruin our decision making process of how we find tenants in the be first place. That's like forcing banks to give bad loans. That was an error. This policy and the thought that bright it Who will pay the cost? what I would say is the most important part of our job!

I hate to say it because you are clearly usually a well reasoned guy who reads policies and you're intelligent. But I see you rationalizing HUD here to make their position look less like the poison it actually is heading us towards. You keep pointing to "which we all agree with". That's incorrect. I want more info not less!! Of course they aren't perfect. The be sky is blue. If all I have is a credit report on one guy, he's 750+, I'm gonna feel much more of comfortable than the guy with 550.

WMH: But if the score is indicative of likelihood to pay, then even those big places that don't have time need to find better screening. That's the whole point -- if the credit score doesn't work for screening for what they want, then it likely shouldn't be used much.

RR78: I think the difference is whether or not it is indicative of likelihood to pay. When it comes to RENT, it turns out that the credit score isn't as indicative as we expect. When it comes to credit card payments, it still might be. There's a big difference there. Also, in my experience, banks DO use other financial data too along with the score.

Larry:

Note that they didn't say to use credit scores at all. It was the "overbroad" use that they were downplaying. Also, in the article, it talks about Black individuals having a median score of 627 and White individuals having a median score of 727.

About 50% of White households have credit scores above 700. Only about 21% of Black households do.

I think their point is not setting some arbitrary credit score limit -- so that you're automatically screening out everyone below, say, 700. (And, to be fair, I'm assuming this likely isn't for McMansion renting here. We're talking about working-class B or C grade rentals here.)

In my area, I rarely get someone above 650, much less 700.

So, I look more at their current job, how long they've had it, whether or not they make enough money to pay all of their bills with the rent. What sort of debts they have -- as we will often ignore most medical debt if everything else is paid up.

THAT is the financial data that I'm looking at outside of the score.

I think the part we disagree on is this: I don't think this says AT ALL that "if if a person can't pay bills" that we still have to take them.

I think we're still fully able to make those decisions.

Note that I think that article came out because of AI. It notes it in the document. They are concerned about using automated systems to auto-deny people without really looking at their financial situation and ability to pay.

They are concerned about using AI and other systems that are looking at credit report data that might not give a good picture of their real ability to pay. (And acknowledging that doing so hurts Black, Hispanic, and Native American people more than White people.)

But that's just my guess.

Perhaps a better practice I could use is following in the steps of the public housing uses for screening applicants. It would be difficult for them to say their own practices are discriminatory.