Whats you're credit score drop off for potential renters?

[Tom R.]

My first property is in escrow and I'm trying to get ready to evaluate applicants. I want to have a full set of standards before I start evaluating applicants that way I can prove I used the same qualifications for everyone. Whats you're credit score drop off for applicants? I realize that the higher the rent the higher the drop off should be. The property in question will rent for $1000 which is a little less than the local average.

[Chris Mason]

Ignore the FICO score, look at the full story told by the credit report. We're forced to use FICO scores as lenders because we have a zillion people and just need a set standard. As a result we say "yes!" to people with 760 FICO scores who immediately go into default and should never have gotten that loan to begin with, and we say "no" to people with 579 FICO scores due to an unforeseen (and unforeseeable) medical issue but with otherwise perfect credit.

For example it often appears that civil judgements in default do not impact FICO score the way one might think they "should." So you have these folks with 760 FICO scores who are perfectly happy to ignore the orders of a judge, or who are perpetually unable to pay their entirely predictable income taxes year after year after year & have to continually make payment arrangements because their payment is always late. 

And then you have folks with low FICO scores who, like I indicated above, just got sick, and got right with all the unexpected expenses and bills over the course of three months, but those late payments do not drop off for 5-10 years.

We're handcuffed into giving out those irresponsible loans, and denying those completely responsible loans, but you as an individual landlord have the freedom to exercise wisdom and discretion that we do not. Use that. Read the story (& if it corroborates with what they say), not the FICO score. Let someone else rent to that tenant applicant with the great FICO score that can't pay their bills on time & ignores the authority of a judge, and be open to that tenant so grateful that you're looking past their FICO score that they will be a rockstar tenant.