Minimum Credit Score for Rental Applicants?

Question

What minimum credit score do you require for rental applicants, and what class of rental is it?

Do you ever approve an applicant below that score when other factors are strong, such as income, rental history, landlord references, or a larger security deposit?

Drew Sygit · Answer

copy & paste from our website, but you do need a LOT of experience to do it our way:

Robust Tenant Screening

A bad tenant can lead to thousands of dollars of losses via unpaid rents, legal fees and property damages. We’re one of the few property managers that require W-2’s and a bank statement and we go way beyond the traditional, “income must = 3x rent” qualifier.

Below is more information about what our Applications Department does to screen applicants and find the best tenants possible for your property.

• Required InfoWe require the following from each applicant over the age of 18, that is not a dependent of another applicant (as evidenced on a tax return):Copy of acceptable state picture IDRecent YTD paystubRecent W-2Recent Bank Statement, all pages, no info blacked outRecent tax return if self-employedApplicants are often slow about turning this information in, asking us why we need it and then taking several days to submit. Then they complain that our process takes too long!
• Copy of acceptable state picture ID
• Recent YTD paystub
• Recent W-2
• Recent Bank Statement, all pages, no info blacked out
• Recent tax return if self-employed
• Credit HistoryMany companies use credit summaries, but we find these rarely tell the whole credit story. So, we obtain a full credit report and review collections, chargeoffs, age of credit accounts, active accounts, etc. to build an overall credit evaluation.FICO ScorePct of PopulationDefault Probability800 or more13.00%1.00%750-79927.00%1.00%700-74918.00%4.40%650-69915.00%8.90%600-64912.00%15.80%550-5998.00%22.50%500-5495.00%28.40%Less than 4992.00%41.00%Source: Fair Isaac Company
• Public RecordsWe also obtain data from national databases about evictions, convictions, and sex-offender histories. These all require applicants to submit an acceptable Letter of Explanation addressing each specific issue and occurrence.
• Rental HistoryBecause a current landlord may say anything to get rid of a bad tenant out of desperation, we also require information for the previous landlord of all applicants…
• Analyze IncomeMany landlords require a month of paystubs from applicants and just use these to calculate a monthly qualifying income…
• Employment StabilityUnless an applicant has exceptional credit, we strive to determine their stability of employment…
• AssetsWe are one of the few management companies that requires a bank statement as part of our application process…
• Letter Of ExplanationAny time there are credit issues or we discover an inconsistency, we require a written letter of explanation (LOX)…
• UnderwritingTraditionally, landlords have only looked at the income of applicants…
• ApprovalOnce an applicant is approved, we require a nonrefundable Holding Fee to make sure they are serious…

We require the following from each applicant over the age of 18, that is not a dependent of another applicant (as evidenced on a tax return):

• Copy of acceptable state picture ID
• Recent YTD paystub
• Recent W-2
• Recent Bank Statement, all pages, no info blacked out
• Recent tax return if self-employed

Applicants are often slow about turning this information in, asking us why we need it and then taking several days to submit. Then they complain that our process takes too long!

Many companies use credit summaries, but we find these rarely tell the whole credit story. So, we obtain a full credit report and review collections, chargeoffs, age of credit accounts, active accounts, etc. to build an overall credit evaluation.

FICO Score

Pct of Population

Default Probability

800 or more

13.00%

1.00%

750-799

27.00%

1.00%

700-749

18.00%

4.40%

650-699

15.00%

8.90%

600-649

12.00%

15.80%

550-599

8.00%

22.50%

500-549

5.00%

28.40%

Less than 499

2.00%

41.00%

Source: Fair Isaac Company

We also obtain data from national databases about evictions, convictions, and sex-offender histories. These all require applicants to submit an acceptable Letter of Explanation addressing each specific issue and occurrence.

Because a current landlord may say anything to get rid of a bad tenant out of desperation, we also require information for the previous landlord of all applicants…

Many landlords require a month of paystubs from applicants and just use these to calculate a monthly qualifying income…

Unless an applicant has exceptional credit, we strive to determine their stability of employment…

We are one of the few management companies that requires a bank statement as part of our application process…

Any time there are credit issues or we discover an inconsistency, we require a written letter of explanation (LOX)…

Traditionally, landlords have only looked at the income of applicants…

Once an applicant is approved, we require a nonrefundable Holding Fee to make sure they are serious…

Ricardo Gonzalez · Answer

600 is my floor for standard approval. Income needs to be at least 3x the monthly rent, and I look at that alongside their debt load, not just gross income. Someone clearing 3x on paper but carrying heavy student loans or car payments is a different risk profile than someone with the same income and minimal obligations.

For applicants under 600 I don't auto-decline. If the income and rental history are solid I'll consider it, but I offset the risk by requiring a higher security deposit or first and last month upfront. The credit score tells me one part of the story. How they've treated landlords in the past tells me just as much.

Class B single family and small multifamily in Orlando, for context.

Rachid Abadli · Answer

@Caryn Seifert — I set my minimum at 620 for Class B units in Sacramento, but the credit score is honestly the least useful data point in my screening process.

What I actually weight more heavily:

• Rental payment history — did they pay their last landlord on time? I call every prior landlord, not just the most recent one. The most recent landlord might give a glowing reference just to get a problem tenant out of their unit.
• Income ratio — 3x rent minimum, verified with pay stubs or tax returns, not just stated income.
• Eviction history — this is a hard stop. No exceptions.
• The story behind the score — a 610 with medical debt and perfect rent history is a better tenant than a 720 with a pattern of late credit card payments and a landlord who says they were always chasing rent.

The key is consistency. Whatever criteria you set, apply them identically to every applicant. Document everything. In states with source-of-income protections or Fair Housing scrutiny, your screening criteria need to be written down before you start receiving applications — not made up as you go.

Janice's 650 threshold for A/B is reasonable. For Class C, I see good landlords in the 580–620 range who compensate with larger deposits (where state law allows) and stricter income verification.

Richard F. · Answer

I do not use credit score as a criteria. You will miss out on some very good tenants by doing so. I'm sure there are plenty of stories on these forums about tenants that had great scores ultimately costing thousands in lost rent and damages. I have had many with poor scores that were excellent long term tenants, but the "score" alone will not help you with either of those scenarios.

I look at the more granular details of a true credit report, identifying Bad Habits. Similar habits will be found in most/all other areas of an applicant's history if they are generally irresponsible. I have placed tenants in all types of properties, from 200 SF "efficiencies" with only a hotplate, mini-fridge, and no bathroom sink, to a $9K per month mansion, in two states, with a very high rate of success. My criteria include, among others: no more than 3 collection items totaling no more than $500; no more than 3, 60 day lates over the past 3 years; multiple 30 day lates within most recent 18 months; fewer than 50% of trade accounts above 50% of the account high limit; and I largely ignore student loans, foreclosures, (finalized) bankruptcies, and medical debt if their other credit details, AND court and traffic records, income, social media, housing, and other data are all acceptable. Court records of all kinds are very critical to review at a granular level as well. I am most interested in general behavior patterns over the past 18 - 24 months, including job security, and financial responsibility.

Janice Carter · Answer

@Caryn Seifert My minimum credit score is usually 650 and most of my properties are Class A and B rentals. I do look at the overall application, including income, rental history and landlord references but I rarely make exceptions below 650 unless there are very compelling circumstances. A strong screening process has helped keep my default rate very low.