I manage all my own properties and screen all my own tenants. In the last year, I have had 5 prospective tenants, all between 34-67 years old who have NO credit history. Is this a scam of some sort? Their names and social security numbers pull up a credit report which simply says something to the effect that they have no credit history. The first gal (64 years old) that fit this profile has now been a tenant for 2 years and always pays early and does not cause any trouble and keeps her place clean. Now that I have seen it a few more times, I'm wondering if in am missing something...
It's good to set requirements of applicants who dont have BAD credit but simply appear to have a 'THIN FILE' because there are like virtually no active lines of credit in the past 7 most recent years.
Ie, it might be a good practice to notify applicants that there was lack of credit entries in their credit 'report' thus if they are still interested in qualifying, they would at least need to verify that the information being submitted to credit bureaus is correct, such as SS#, date of birth, address, and bank account statements.
To verify SS#, require the card; to verify DOB, require state issued ID (ie, license), to verify address, require a utility bill in their name or if none, then a state or government issued letter showing their address, and to verify financial responsibility, savings statement.
not advice, just my thoughts on how to consider folks with no bad credit, but no good credit to work with either.
My observations are: there is no correlation between un-banked applicants with no credit history and tenant performance, no/low credit history means they are not in default, any age group can have low/no credit history, if you rely on credit scores only then you eliminate some good tenant candidates.
Prior evictions, stability of residence and work history, criminal background (as in no criminal history) are more important criteria (IMO) than lack of credit.
Great discussion point. I have to agree with @Chris Martin. I'd focus my tenant screening on rental history, prior evictions, criminal history, income history and poor credit history and would be less concerned about it if they have no recent credit history. Just my thoughts.
Good luck to you!!
I am a huge believer in figure out all the facts and than see if you are okay with the "why". So I would want to know the "why", lived with family member as caregiver, married young with no assets, etc. If I was okay with the reason, I go from there. If I wasn't than I don't. LOL
We've never used credit scores for any homes, or offices we've rented. We have always gone off meeting people and talking with them. Never had anyone we've had to evict.
Right now there are people all over America, living on the streets because the market crashed, entire industries collapsed, jobs were lost, people fell behind on payments, had properties foreclosed on, cars repoe'd, etc. and their credit scores plummeted. If the only thing people look at and place value on is credit scores, what will happen to all of those people?
"No" or "minimal" credit history is far better than "BAD" credit history. The challenge sometimes for those with little in their credit file is getting utilities in their name; they might have to pay a hefty deposit to get utilities if they haven't already had utilities in their name. So you might want to see that they have previously had utilities (and that they weren't shut off for non-payment), or that they can come up with a deposit for the utilities (I.e. they must have some extra money in a bank account).
Then we have the folks who pay with cash and if you don't have the cash you wait
BTW, there are a number of reasons for few credit file entries. They could be new arrivals in the USA; they could be paying cash for everything; witness protection program too :)
Of course, they could have had a bad run, then were denied credit for many years and then no longer pursued getting credit for a while, so all the bad stuff dropped off with not much else to come into the picture. No way to know at this point, unless they can be trusted to tell the truth (but no way to verify that you are getting the truth).
Many people just avoid debt. Often they don’t fully understand the benefits of leverage and see debt as something to be feared. Verify that they are who they say they are and you should be fine. Also call their references! You can easily get the most important information from employers and previous landlords.But also verify that their references are also real. If they say they work at Walmart, call that Walmart and ask to speak with their supervisor. Some sneaky prospective tenants will claim a reference as an employer or previous land lord but it will actually be a close friend willing to lie.
Hello everyone. THANK YOU for all the responses!! I am in agreement with all of you who pointed out that there are several good measures of a good/bad tenant. Since I am still under 20 units, I meet each prospective tenant and "gut instinct" has been a great barometer. Maybe I have passed over a good tenant because they gave off a bad "vibe" but luckily, I have not accepted any bad ones yet. My original question was based on my own ignorance. Pretty much just couldn't wrap my brain around how you could be a "grown up" without any credit history. Wasn't sure if I was seeing the result of a scam and wanted to run it by you all. Thanks for chiming in. I really appreciate that you all are willing to share your ideas and knowledge.
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