Adverse Action Notice: Landlord’s Guide [+Template]

Under the FCRA, landlords must send an adverse action notice should they deny a tenant’s application based on information gained from a credit report.

Filling vacant rental units can be a time-consuming and stressful process, and there’s a lot of pressure to choose the best possible tenant. Selecting a bad tenant comes with the risk of late or missed rent payments, property damage, or evictions. 

This invariably means landlords will have to reject some of the prospective tenants who apply for their rental. This will be done at either the prescreening, application, or tenant screening stage.  If a rental applicant fails to pass the final stage, the tenant screening stage of the tenant selection process, then landlords will need to send what is known as an adverse action notice. 

In this guide, we explore what an adverse action notice is, when and why a landlord needs to send one, and what needs to be in it.

Related: The Landlord's Guide To Tenant Screening

Key Takeaways

  • Landlords must send an adverse action notice should they deny a tenant’s application based on information gained from a credit report.
  • Adverse action notices are required in these circumstances under the Fair Credit Reporting Act.
  • Key details to include in an adverse action notice must include the reason the rental application was rejected as well as outline the tenant’s rights and protections.

What is an Adverse Action Notice?

An adverse action notice is a formal document that a landlord sends to a tenant if they deny an application based on information obtained from a credit report. 

What this means is, if you run a credit check on a tenant and find they don’t meet your minimum criteria, then you need to send an adverse action notice to the tenant to inform the tenant of the reason they were denied (eg. their credit score was too low) and inform them of their rights pertaining to the handling of their financial data.

The notice should include the following details:

  • Name, address, and contact information of the consumer reporting agency
  • The credit score utilized in the decision-making process
  • Notification regarding anti-discrimination laws
  • Explanation of the creditor's decision
  • Specific reasons for issuing the notice
  • Information about the applicant's right to request a free copy of the credit report used

Landlords must include all of the above information if they want to remain compliant with the Fair Credit Reporting Act. Failure to do so, especially regarding notices from the credit reporting agency and free credit report details, can expose you to legal actions and disputes from the applicant.

When Must Landlords Send An Adverse Action Notice?

There are a few scenarios where landlords are required to send an adverse action notice. While some causes, such as low credit scores, are obvious reasons for an application’s rejection, others are less obvious and may need to be explained in greater detail on the adverse action notice.

Below we explore some of the common reasons an application might be rejected because of the details received in a credit report, and which would mean an adverse action notice needed to be sent.

Credit Score Does Not Meet Minimum Requirement

Probably the most common reason an adverse action notice would be sent is because the applicant’s credit score is too low.

Landlords often shy away from applicants with low credit scores due to the elevated risk they pose. Such scores can stem from various factors but primarily relate to missed bill payments. These can indicate financial instability and a high risk that rent will be paid late. 

A High Debt to Income Ratio

Someone with a significant debt burden may have issues fulfilling them all, which puts them at a high risk of not meeting their rental payments. Naturally, landlords prefer applicants with lower debt and higher income, as it indicates a greater level of financial responsibility and capacity to afford their rent.

Not Enough Credit History

A lengthy and positive credit history indicates a track record of responsible credit management. If an application is otherwise sound this might not be reason enough to reject the applicant, however, should other areas of the application raise questions, then landlords often look to the credit history to get a picture of a tenant's financial responsibility. 

What Information to Include in an Adverse Action Letter

An adverse action letter must include certain information to effectively serve its purpose and remain legally compliant. 

The different sections of an adverse action notice include:


Initiate the letter with an introduction, including essential details such as the date, the applicant's name, address, and other pertinent information. Additionally, express gratitude to the applicant for their time and effort in the application process.


Outline the reasons behind the adverse action (eg. your credit score was too low). 


Provide instructions on how the applicant can appeal the adverse action decision. This section should outline the process for submitting an appeal, including the necessary time frame and contact information.

Rights and Protections

Include information regarding the rights and protections afforded to the applicant by federal law. This section is crucial and should cover key legislation such as the Fair Credit Reporting Act and the Equal Credit Opportunity Act. 

Key details of these protections are:

Fair Credit Reporting Act (FCRA)

The Fair Credit Reporting Act (FCRA) is legislation designed to empower consumers with insights into credit-related decisions. This act holds significant importance as it grants consumers the ability to comprehend the utilization of their credit information.

Under the FCRA, consumers have the right to ascertain if their credit details influenced the decision-making process. Furthermore, the act affords consumers the opportunity to ascertain the sources of the information utilized and its impact on the decision.

Incorporating information about the FCRA into the letter is imperative as it ensures consumers are aware of their rights. It's crucial to elucidate how the information was acquired and elucidate the procedure for accessing their complimentary credit report.

Equal Credit Opportunity Act (ECOA)

The Equal Credit Opportunity Act is an act that serves to protect credit applicants from any sort of discrimination when it comes to their applications. The act states that individuals partaking in any credit application can only be evaluated using factors that are directly related to their creditworthiness.

This means that creditors and lenders are not allowed to consider things like race, color, national origin, sex/gender, religion, marital status, and age. They are not allowed to consider any of these factors during any stage of the application process.

Related: Fair Housing Act: What Landlords Need To Know

Final Statement of The Adverse Action Notice

The concluding section of the adverse action notice should comprise a closing statement. This segment is valuable as it provides contact details for addressing any general inquiries or questions from the applicant.

Adverse Action Letter Template - Example

Copy and paste the below adverse action notice template into a word document and edit as required. 

[Your Name] 

[Your Address]

[City, State, ZIP Code] 


[Applicant's Name] 

[Applicant's Address] 

[City, State, ZIP Code]

Dear [Applicant's Name],

We regret to inform you that your recent rental application for [Property Address] has been declined based on the information obtained during our screening process. This letter serves as an adverse action notice in compliance with the Fair Credit Reporting Act (FCRA).

Reasons for the adverse action:

  • Low credit score: Upon reviewing your credit report, it was found that your credit score falls below our minimum threshold for approval. A low credit score poses a higher risk for timely rental payments.
  • Debt-to-income ratio: The analysis of your financial background revealed a high debt-to-income ratio, indicating potential difficulty in meeting rental obligations.
  • Limited credit history: Your credit report indicates a limited credit history, which provides insufficient evidence of your ability to manage financial responsibilities effectively.

While these are the primary reasons for our decision, please note that additional factors may have influenced the outcome of your application.

If you believe there has been an error in our decision or would like to provide further information for reconsideration, you have the right to appeal. Please submit your appeal in writing within [number of days] days from the date of this letter to:

[Landlord's Name] 

[Landlord's Address] 

[City, State, ZIP Code] 

[Contact Phone Number] 

[Contact Email Address]

You also have the right to obtain a free copy of the credit report used in our decision. If you wish to receive a copy, please contact the consumer reporting agency listed below within [number of days] days from the date of this letter:

[Consumer Reporting Agency Name] 

[Consumer Reporting Agency Address] 

[City, State, ZIP Code] 

[Contact Phone Number] 

[Contact Email Address]

We appreciate your interest in renting with us and regret any inconvenience this decision may cause. Should you have any questions or require further clarification, please do not hesitate to contact us at [Contact Phone Number] or [Contact Email Address].


[Your Name and Signature] 

[Your Title, if applicable]

[Landlord's Company Name, if applicable]

Final Words: Managing Adverse Action Notices

Ensuring that your adverse action notice is compliant with the Fair Credit Reporting Act (FCRA) and the Equal Credit Opportunity Act (ECOA) is not just a legal obligation but also a step toward fostering transparency and trust with potential tenants.

To help streamline the management of tenants and important documents such as leases and your adverse action notice it may be worth exploring how property management software like Landlord Studio can help.

Landlord Studio, for example, offers tools to help create and manage rental listings and screen tenants to reduce the risk of bad tenants and costly evictions. Additionally, you can easily track leases and communications, collect rent online, and automate important communications like rent reminder emails. This will save you time, reduce the risk of legal disputes, and help enhance the overall tenant experience.

With Landlord Studio, you can focus more on building positive relationships with your tenants and less on the administrative burdens. Equip yourself with the right tools and ensure your property management practices are both effective and compliant.

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