At the risk of offending professional property managers everywhere, I’m just going to say it:
Landlords do not need to collect social security numbers to screen rental applicants.
Traditionally, SSNs have been required
I’ve been a landlord for almost 10 years, and yes, I’ve collected Social Security numbers (SSNs) from most of my applicants. Traditionally, they have been required to run credit and background checks, but not so anymore.
In years past, hiring a third-party screening company was the only secure way to get an applicant’s credit report.
However, in the last five years, all three major credit bureaus have begun offering or have partnered with companies like Cozy to offer landlords the ability to order credit reports on their own, without having to request an SSN.
When Experian asked Cozy to lead the development of this new technology, it addressed the following question:
Why should renters have to put sensitive information like SSN and bank information on a piece of paper and hand it over to a complete stranger?
The Dangers of Collecting a SSN
With identity theft becoming the #1 crime in America, renters are increasingly hesitant to give out this information, especially to landlords whom they have just met.
When Cozy CEO Gino Zahnd was moving to San Francisco, a potential landlord accidentally ran his credit score six times in three hours, simply because the landlord didn’t know what he was doing. Gino’s credit score dropped dramatically, and it took a while for his score to recover.
Gino bounced back and found another place to live, but the potential landlord could have been held liable for the damage caused to Gino’s credit.
Pros and Cons
Let’s examine the pros and cons of collecting SSNs on a traditional paper application.
Benefits of Collecting a SSN:
- Screening Companies
If you don’t want to lift a finger, you can hire a third-party background screening company to do the work for you. Though they don’t need a SSN for criminal background checks, they will need it if you want them to pull a credit report.
- Sense of Security
You feel like you have the tenant by the throat, but is that really a good thing?
Landlords have the lowest success rate of collecting a debt compared with every other industry. However, if you want to hire a third-party collections agency to attempt to collect on the unpaid rent, you’ll need the tenant’s SSN.
Drawbacks of Collecting a SSN:
- Burden of Secure Record Keeping
You have to safeguard the personal information, which costs time and money.
- Confusing Laws
You must follow many state laws regarding the storage of personally identifiable information (PII), many of which are confusing and easily broken.
- Increased Liability
You could (and should) be held liable if their identity is stolen because you failed to protect it.
- Immediately a Suspect
If their identity is stolen, you could find yourself at the top of a police suspect list, which is just unnecessary drama.
- Creates Distrust
It creates distrust between you and the applicant, as you are forcing them to either jeopardize their identity security or risk not getting your rental unit. You’ll want to reduce entry barriers, not increase them.
- Your Family Can’t be Trusted
Most identities are stolen by a family member or trusted friend. Don’t give Uncle Roman a chance to steal your tenant’s identity.
- Application Fees
You have to collect, process, and document application fees to pay for the third-party screening. Why not just make the tenant pay for the credit report directly, and skip the application fee completely?
Why You Don’t Need to Collect SSNs
Experian, TransUnion, and Equifax offer tenant screening services for landlords without the need for the landlord to collect a SSN. In fact, all you really need is an email address and the tenant’s participation. Third-party screening companies are just an unnecessary middleman.
We’ve taken this a step further by integrating the Experian credit report within Cozy, thereby allowing the landlord to accept online applications, screen tenants, order credit reports, and collect rent from a single tool.
Years ago, civil courts started removing SSNs from criminal reports and court records. Because these records were publicly available, other criminals were stealing the SSNs off of the records and using them for identity theft.
All you really need to run a background check is the applicant’s first and last name and date of birth. Obviously, having previous addresses or a photo is helpful as well when your applicant’s name is John Smith.
Evictions and Small Claims:
You don’t need a SSN to file an eviction or small claims court case. The process will vary from county to county, but typically the only information needed to open a case is a name and current address. Check with your local civil courthouse to learn about your local eviction process.
During your court hearing, you can also ask for the court to approve a wage garnishment. If approved, the judge will issue a court order with requires an employer to comply. An employer would probably prefer you to have a SSN to verify the identity, but they can’t require it since the court didn’t require it.
Even if the tenant doesn’t show up for court, you would still be able to garnish wages without having the tenant’s social security number.
If you win a judgment and want to involve creditors and collection agencies, then yes, you will need your tenant’s SSN. However, when you win the case, you can request that the judge force disclosure of the SSN at that time.
The only time this wouldn’t be realistic is if the tenant doesn’t show up for court. You would be awarded the eviction and possible financial judgement but wouldn’t be able to hire a collections agency to report the debt on their credit report.
I often hear other landlords say, “I need to be able to ruin a tenant’s credit if they don’t pay rent.”
The truth is that you can’t actually report a debt directly to the three big credit bureaus. If you win the judgment, most credit reporting companies will pick up on the judgment automatically. No action is needed on your part.
Further, should you really be retaliating? It could get you into legal trouble if you vengefully take it too far.
It’s Not Worth the Risk
During the screening process, I was increasing not only my responsibility to protect this sensitive information but also my liability if I mishandled it.
It made me nervous, and cost me extra time and money to safeguard the information through locked file cabinets and extra security.
If a SSN is not needed for tenant screening, then why was I collecting it?
It was a question that flew in the face of traditional screening practices. It was tough to admit, but no less true. Social security numbers were no longer needed to screen tenants.
If you still feel that you must collect a SSN, do it on the lease, not the rental application. That way, you’ll have only the SSNs of your tenants, and not the other rejected applicants.
If you are incredibly worried about needing a collections agency in the future, then perhaps you should improve your screening process, and pick better tenants.
What About You?
Do you agree or disagree with my arguments? If you still collect SSNs from your applicants, I’d love to hear why you feel the benefits outweigh the risks.
Let me know in the comments below.