No Credit Check forTenant - Should I rent to them?

Question

If you have a tenant that does not have established credit who is part of an older generation that doesn't believe in credit, would you rent to them? Every thing else as far as criminal, rental, and income has checked out.

Let me know your thoughts and how you handled a similar situation.

Missy H. · Answer

I had that problem with a prospective tenant a few years ago.  The property is in a "dangerous" neighborhood and most of the residents are low to no income.  I met with quite a few prospective tenants and all had bad credit except for one who had no credit.  Let's call him "Al".

Now, I had met Al and his girlfriend a few times since they had come by several times to see the apartment and show it to their friends and family.  In those meetings, I got to know a few things about him and his girlfriend.  One of the things that I found out about him was that he had a black belt in karate, or one of the other martial arts, I can't remember which.  I thought to myself that if someone is disciplined enough to earn a black belt, it shows character and honor.

I ended up renting the apartment to him and do not regret the decision.  They pay on time and the only times they were late were the two months around the time they just had a baby and the girlfirend was not working.  They are conscientous and always keep the apartment clean.

I am not saying that I would do the same for every person who has a belt in the martial arts.  I am just saying that when the numbers don't allow me to make a decision, I have to go with what I do know about the person and instinct.  In this instance, it worked out for me.

Steve Babiak · Answer

As I've posted elsewhere, no credit score is better than a 453 credit score that got that low due to failure to pay debts in a timely manner ...

So does your rental criteria have something to deal with this?  Do you allow other factors to compensate, such as requiring higher documented income, bigger deposit, stability at job or prior rental home, etc?

Account Closed · Answer

I would always get the current landlord's feedback and then the one previous to that too. The reason I do is:

1) If tenant is still living in current landlord's property, then they probably haven't done the final walk-through etc.  I have had some tenants that were awesome throughout and then after final-walk through, I couldn't give them back any of their security deposit because of all the problems they left behind.  Prior to the walk-through, their future landlord called me to get feedback and I gave them a "glowing" review which I certainly would not do now.

2) I also like to get the previous landlord's feedback as the current landlord may want to get rid of tenant and so if he/she is shady then they will say/do anything to get them out.

3) I also like to confirm how much they were paying previously to understand if they will be paying substantially more/less with my rental.  If it is substantially more but their income hasn't changed, they may struggle with rent or not stay there long.

Brett S. · Answer

I'm against the pack here, but in my experience the only people without credit are those who actively hide income (generally people engaging in illegal activities and/or tax evaders).  Also tells me they are behind the times and poor managers of their finances (because you might as well get 2% cash back on every purchase with a credit card vs paying cash unless cash carries a larger discount than the credit card, which is actually against credit card agreements for vendors in many cases).

I'm not a lawyer but I'd guess you would also want to get something in writing from them that you can tap their retirement account if they have no job; you can't garnish a retirement account like you can an employee wage.  Adds risk.

I would also ask for a statement from their stock broker / banker (and if they're retired they should have one) and at least the first 2 pages of the last two years of tax returns if they can't provide a paystub.

Tyson Luthy · Answer

I agree with a lot of the comments here - that no credit is not as bad as poor credit.

In our screening process, we have built "no credit" into our scoring system:

• They score nothing for the category "credit score"
• But they get a high score on "payment history"

These sort of wash each other out, giving the applicant a "neutral" score that is then influenced by other categories.

This has seemed to work well for us overall, and we don't have too many problems with people who don't have credit history - it is often a reflection of good budgeting, especially in older individuals.

Anil Samuel · Answer

They are retired so no to employment history.  I will have to check further about previous landlords.  I doubt I will be able to charge a tenant such a substantial deposit in my area, especially a retiree.

Michael Noto · Answer

No credit it better than bad credit.

Is the employment history there? Has he had long stints at other places he's lived?  If so, see how much security you can get out of him and go from there.

If the money is there and the guy has no credit, if he really wants the place maybe you can get 1.5 or 2 months security to mitigate your risk.

Anil Samuel · Answer

I appreciate all the feedback!  That was such a quick response.

Generally I have a minimum credit score, income requirement and other criteria.  This person has family in the area that will be taking care of them.  So the family found the place for her.  I have never met the actual tenant.

This is what I have from the broker that is assisting with my tenant placement for this property.

Background check results: none found

Credit: No credit score, no debt

Evictions: None

Identity: Confirmed, valid SS#

Income: Verified

No pets, only one occupant

Jesse T. · Answer

I would try to get as much information as possible showing their ability to pay on bills on time.  If you can get past landlord references that is probably the biggest help.  Also if they can provide documentation of paying utility bills on time, that would be helpful.  You may want to add an alternative to good credit in your application/review process - so you can do it in a reproducible manner.

Randy E. · Answer

When my wife and I bought our primary residence, I had the same issue with my credit reports.  Two of the the three major agencies did not have a "report" for me.  The third agency had very little information on me, but had enough for me to have a score over 600.  My credit union loan specialist was surprised that I was in my 30s and had hardly used credit, but they happily accepted that.  Now, my credit score is in the mid 700s.

The fact is, for various reasons, some people don't use credit.  No credit is a much different scenario than bad credit.  Perhaps because of my personal history, I would have no problem renting to your applicant since everything else appears to check out fine.

Good luck.

No Credit Check forTenant - Should I rent to them?

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