Can You Refuse an Applicant Based on a Poor Credit Report?

Yes, but there are certain legal requirements with which you must comply.

In the case of rejecting an applicant based partly or entirely on the negative information you obtained from a credit report, you are legally mandated to give the applicant a written notice that must include the following:

  1. A statement informing the applicant that the decision was based, either partly or entirely, on information in the credit report

  2. The name, address, and phone number of the agency from which you obtained the report

  3. A statement informing the applicant of their right to obtain a free copy of the credit report from the same agency that prepared it, and to challenge the accuracy of the information stated in the report

Tellus TIP:

If an applicant decides to challenge the information from the report, you have to be very careful in assessing whether or not they have logical grounds on which to base their claim. Another option is to find a different agency to prepare a report and compare the two to see if the information is the same.