How to Write an Adverse-Action Letter to a Rejected Applicant

TL;DR: If you deny a rental applicant because of something in a credit report or background check, federal law (the Fair Credit Reporting Act) requires you to send an adverse-action letter naming the reporting agency, stating it didn't make the decision, and telling the applicant they have 60 days to dispute the report or request a free copy. Skipping this step can expose you to $100-$1,000 in statutory damages per violation, plus attorney fees.

_Last reviewed: July 2026 · 7 min read_

Rejecting an applicant feels straightforward until the phone call from a lawyer arrives. Landlords who pulled a credit or background report and denied someone based on it have a specific legal obligation, and getting the letter wrong is one of the most common ways owner-operators end up in a fair-housing or FCRA dispute.

Okoniq Property Hub helps landlords log applicant decisions, screening dates, and letter timestamps in one place, so there's a clear record if a denial is ever questioned.

What is an adverse-action letter and when do you need one?

An adverse-action letter is a written notice you send when you deny, or offer worse terms to, an applicant based wholly or partly on information from a third-party consumer report — a credit check, criminal background check, or eviction history report. The Fair Credit Reporting Act (FCRA), enforced by the Federal Trade Commission and CFPB, has required this since 1970, and it applies to every landlord who uses a screening company, not just large property managers.

You need one any time a credit score, collection account, criminal record, or eviction filing played a role in the decision. If you rejected someone purely because they couldn't verify income or the unit was already rented, no FCRA letter is required. But if a screening report was part of the reasoning at all, even 10%, the letter is mandatory.

What must the letter legally include?

The letter must contain five specific elements, or it doesn't satisfy the FCRA. These are: the name, address, and phone number of the consumer reporting agency (CRA) that supplied the report; a statement that the CRA did not make the rental decision and can't explain why it was made; notice that the applicant has 60 days to dispute the accuracy of the report directly with the CRA; notice that the applicant can get a free copy of the report from that CRA within 60 days; and a statement of the applicant's rights under the FCRA.

Many landlords also include the specific reason for denial (low credit score, prior eviction, insufficient income), though the FCRA itself doesn't strictly require this — some state and local "fair chance" ordinances do. Check your state statute before finalizing a template, since requirements vary by city and county.

How long do you have to send it, and is there a two-step process?

Yes, and most landlords miss this. The FCRA effectively requires two notices, not one, when a report drives the decision. First, a "pre-adverse action" notice goes out before you finalize the denial, including a copy of the actual report and a summary of consumer rights. This gives the applicant a reasonable window, typically 5 business days, to review the report and flag errors before you commit to the rejection. Only after that window closes do you send the final adverse-action letter confirming the denial.

Skipping the pre-adverse step is the single most common compliance mistake. It matters because credit and background reports contain errors regularly, roughly 1 in 5 consumers has an error on a credit file significant enough to affect a lending decision, according to a 2013 FTC study. If you finalize a denial before the applicant can correct a mixed-up file, you're liable even if the report was wrong through no fault of yours.

| Step | What You Send | Timing | |---|---|---| | Pre-adverse action | Copy of report + summary of rights | Before finalizing decision | | Waiting period | Nothing — just time to respond | ~5 business days | | Final adverse action | Full FCRA notice (5 elements above) | After waiting period, before/at denial |

What are the common mistakes that get landlords in trouble?

The biggest mistake is sending only one letter, or none at all, and assuming a verbal "sorry, you didn't qualify" call covers it. It doesn't. Verbal notice has no paper trail, and in an FCRA dispute, the burden falls on you to prove you sent proper notice — a text message or phone call won't hold up.

The second mistake is using a template that's missing the CRA's contact information or the 60-day dispute language, often because a landlord copied a generic denial letter off the internet without checking it against FCRA text. The third is inconsistent timing — sending the pre-adverse notice and final letter on the same day, which courts have found doesn't give applicants a "reasonable" opportunity to respond.

The same discipline that keeps a rental property running smoothly applies here: write it down, timestamp it, and keep it. Landlords who track 5 foundation checks you're forgetting every spring or log 1-inch vs 4-inch furnace filter swaps already understand that documentation protects you later — the same logic applies to every applicant file, not just every furnace filter.

What if you're rejecting someone for a reason unrelated to a credit report?

If the denial has nothing to do with a consumer report — say, the applicant's pet violates a no-pets policy, or someone else applied first with a stronger income-to-rent ratio — the FCRA notice isn't triggered. You still owe the applicant a timely, professional decision, and it's smart practice to put even non-FCRA denials in writing for your own records, in case a fair-housing complaint surfaces later claiming the denial was pretextual for a protected-class reason.

Keep a simple log of every applicant: application date, decision date, reason category, and whether a screening report was used. If your denial reasons are never documented anywhere, a discrimination claim becomes your word against theirs with no supporting paper trail.

FAQ

Do I need a lawyer to write an adverse-action letter?

No. Many state apartment associations and the CFPB publish free compliant templates. A lawyer review is worth the cost once, to confirm your template meets your specific state's added requirements, then you can reuse it.

What happens if I don't send one?

You risk FCRA statutory damages of $100 to $1,000 per violation, plus actual damages, punitive damages, and attorney fees if the applicant sues, per 15 U.S.C. § 1681n.

Does this apply if I run the credit check myself instead of using a company?

The FCRA specifically covers reports from a consumer reporting agency. If you pull a credit report through a CRA like TransUnion SmartMove or a tenant-screening service, the obligation applies even if you're a single-property owner-operator.

Can I deny someone just for having bad credit?

Yes, credit history is a legal basis for denial as long as it's applied consistently to every applicant and doesn't function as a pretext for discriminating against a protected class.

How long should I keep copies of adverse-action letters?

Keep them for at least 2 years, which aligns with the FCRA's own recordkeeping expectations and the statute of limitations for most related claims, though 5 years gives you a wider safety margin.

*This is educational information, not legal advice. Consult a landlord-tenant attorney familiar with FCR