Young couple good income bad credit ........quandary

Severna Park, MD · Member since 2013 · 7k+ posts · 7k+ votes

I have a young couple wanting to rent a 2/1 for 1325.00 a month They have good jobs and the income is more than necessary to qualify . But their credit is 466 and 501 . They are in their mid 20's . Everything else looks fine . No evictions , bankrupt 4 years ago , current on payments for last 1 year . My smart move says to reject , I am thinking either a larger security deposit , and or a co signer . Opinions?

0 Reply

14 views

Most Popular Reply

Mark F.

Investor · Orange County, CA · Member since 2009 · 230 posts · 138 votes

11y

You never want to be a hungry landlord! There's a reason banks don't lend even secured money to people with credit like that.

2 Reply

See this reply in the discussion

17 Replies

Jump to latestLatest

Sort by

Bill P.
Investor | Syndicator | Instructor · Cincinnati, OH · Member since 2008 · 435 posts · 198 votes
11y
Go with the larger security deposit BUT make a standard process to do it so you can apply the same concept to all potential renters in the future so you don't end up being on the wrong end of a discrimination suit.
1 Reply
Elizabeth Colegrove
Hanford, CA · Member since 2013 · 5k+ posts · 1k+ votes
11y
I am a huge believer in figuring out the why and than going from there. I have had "perfect" on paper tenants who have been horrible. I have had a horrible "credit" tenants who have been stellar every where else turn out to be amazing! So again it really depends on the tenant!
0 Reply
Kimberly T.
Investor · Colorado Springs CO · Member since 2014 · 535 posts · 253 votes
11y
Doesn't matter if they're pulling in seven figures if they're not using it to pay their bills on time. They sound terrible to me, personally. Just my opinion.
0 Reply
Joel OwensBusiness Member
Moderator
Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
11y
To get 466 and 501 Is about in the bottom 15% of all credit in the U.S.
You have to have a ton of negatives to get down that low and I mean a ton.
Something isn't matching up. You need to dig further into your own research.
Podcast Guest on Show #47
NNN Invest53 Reviews
Website View Page
0 Reply
Scott Miller
Smyrna, GA · Member since 2015 · 14 posts · 3 votes
11y
Those scores are so low! Assuming that you like them (that's a must!), get a co-signer and as large a deposit as you can (6 months). You are in Maryland so that's a pretty tenant-friendly state on evictions. Do you know how long it takes to evict a tenant there? If not, find out. Can't imagine what has created such a drag on their credit. If I were you, I'd get them to provide me a copy of their credit report so that you can see EXACTLY what is causing those scores. Perhaps they defaulted on some low-balance medical accounts (I wouldn't give that a second thought) and they have no other accounts. Without seeing the report, I can't advise you beyond that. Go for broke though, no one else is likely to lease to them.
0 Reply
Don Glasgow
Involved In Real Estate · Saint George, UT · Member since 2015 · 10 posts · 18 votes
11y
Property manager here - those are horrible scores. After you put them in call your attorney to let him know you will have an eviction to do. Our company wants FICO scores of 630 or higher. Plus we do criminal background checks.
0 Reply
Bryan N.
Investor · Hampton Roads, VA · Member since 2014 · 1k+ posts · 418 votes
11y
Income and credit are my initial screens. 3x and score 600+. If they can't meet that, I'll let another landlord have them. I love drama free tenants.
1 Reply
Mark F.
Investor · Orange County, CA · Member since 2009 · 230 posts · 138 votes
11y
You never want to be a hungry landlord! There's a reason banks don't lend even secured money to people with credit like that.
2 Reply
Michael Noto
Real Estate Agent · Southington, CT · Member since 2008 · 5k+ posts · 3k+ votes
11y
2 months security, a co-signer, and have a debit card on file that you run the first Friday of every month for the rent.
That is very low credit and if they aren't willing to do all of the above they are not worth considering IMO. They need you more than you need them.
0 Reply
Mike F.
Investor · Denver, CO · Member since 2015 · 570 posts · 521 votes
11y
Originally posted by @Matthew Paul:

I have a young couple wanting to rent a 2/1 for 1325.00 a month They have good jobs and the income is more than necessary to qualify . But their credit is 466 and 501 . They are in their mid 20's . Everything else looks fine . No evictions , bankrupt 4 years ago , current on payments for last 1 year . My smart move says to reject , I am thinking either a larger security deposit , and or a co signer . Opinions?
Have they rented before? A good rental reference or two would put my mind to ease, that and of course a fat security deposit.
0 Reply
Matthew Paul
OP
Severna Park, MD · Member since 2013 · 7k+ posts · 7k+ votes
11y
Originally posted by @Mike F.:

Originally posted by @Matthew Paul:
I have a young couple wanting to rent a 2/1 for 1325.00 a month They have good jobs and the income is more than necessary to qualify . But their credit is 466 and 501 . They are in their mid 20's . Everything else looks fine . No evictions , bankrupt 4 years ago , current on payments for last 1 year . My smart move says to reject , I am thinking either a larger security deposit , and or a co signer . Opinions?
Have they rented before? A good rental reference or two would put my mind to ease, that and of course a fat security deposit.
They are currently living with his father , the father is selling the house , its listed at $ 650,000. I checked state records about ownership , her bad credit started at the time of a divorce , his credit started with a jewlery store a went bad around a child support case . But those low numbers still have me concerned , I have to contact employers tomorrow .
0 Reply
Dana WhickerPro Member
Investor · Fernandina Beach, FL · Member since 2014 · 557 posts · 374 votes
11y
You have to work pretty hard at it to have scores that low. A "friend of mine" once had a bankruptcy and 2 foreclosures on his credit and still had a 580.
0 Reply
Jonathan Key
Real Estate Investor · Longview, TX · Member since 2015 · 122 posts · 62 votes
11y
Originally posted by @Dana Whicker:

You have to work pretty hard at it to have scores that low. A "friend of mine" once had a bankruptcy and 2 foreclosures on his credit and still had a 580.
Wow...that means I did a really good job screwing mine up bad in the day! I'm glad I stopped the bleeding when I did. But even I didn't get in the 400's, that's really low.
0 Reply
Matthew B.
Investor · Howey in the Hills, FL · Member since 2013 · 376 posts · 114 votes
11y
Sometimes credit scores don't tell the whole story. I look at the individual items on the credit report. You need to see what is contributing to the low score. Some of my best tenants have horrible credit scores. The way I look at it, if they had excellent credit they would probably be buying instead of renting. If they check out otherwise, I'll usually rent to them. Landlord references and eviction history (if any) are much more important in my opinion.
2 Reply
Mike F.
Investor · Denver, CO · Member since 2015 · 570 posts · 521 votes
11y
Originally posted by @Matthew B.:
Sometimes credit scores don't tell the whole story. I look at the individual items on the credit report. You need to see what is contributing to the low score. Some of my best tenants have horrible credit scores. The way I look at it, if they had excellent credit they would probably be buying instead of renting. If they check out otherwise, I'll usually rent to them. Landlord references and eviction history (if any) are much more important in my opinion.
Totally agree.
Majority of bad credit for 'good' people is by divorce or medical bills. It seems few people go through a divorce without having their credit ruined.
Majority of bad credit for 'bad' people is bounced checks, unpaid credit cards, collections for water bills, collections from video stores etc... you get the idea. Going through a divorce and having bad credit gets looked at very differently than somebody with bad credit for bouncing checks at the liquor store.
2 Reply
Stephen E.
St Thomas, Ontario · Member since 2013 · 575 posts · 408 votes
11y
@Matthew Paul Most tenants do not have great credit, in most cases that is why they are tenants. The skilled landlord learns how to read through gradations of bad credit and establish which cases have merit and which are truly awful. I think the consensus is pretty clear, these scores are very low indeed. There would have to be massive positives to take them on and I don't see that in your account, other than getting a month's rent. The classic screening error is to go for up front dollars only to have downstream pain. How much does an eviction cost in Maryland? How much rent could you lose sorting that out? The best predictor of future behavior is past behavior, and they have a documented history of bad past behavior.
0 Reply
Rob Gribben
Bel Air, MD · Member since 2014 · 119 posts · 36 votes
11y
I would proceed with great caution with scores that low. If they have any issues paying things like utility bills and car loans, I would more than likely reject them. If your prospects for getting more qualified tenants are reasonably good, I would reject their application.
0 Reply

Join the conversationCreate a free account to reply, vote on answers and follow this thread.