Low credit score but with co-signer

8 Replies

I don't have much experience to determine if this tenant is good. So, post here to see what do you think. I got this email from my PM, and i think her credit score is too low but she has co-signer.  Other then that all looks fine.  For a normal working person, it is not easy to reach credit score so low like that. So, I prefer to say no. What do you think? Also, I will need to ask any eviction before.

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Her name is xxxx, she has a 529 credit score with 25 total accounts, 19 are open and 5 are negative. She is an accountant for yyyyyy. and has been there for the past 2 years. She makes approx. $4,160 a month. She has a co-signer with a 725 credit score with 45 total accounts, 28 open and 0 negative.

NOTE: There will be one minor that would be living in the home.

xxxx is currently renting and has been there for four years with no late or missed payments. The Property Manager stated she is a good tenant.

xxxx does not have any pets and is willing to do the 2 year lease, as you requested. We have also let her know that she will need to pay a double deposit.

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I know some of the BP landlords here will kill me for saying this but......Yea take her. As long as there is no prior evictions, then yea. Yes she has a very low score but who knows what was the reason; a divorce, a sickness, lost job etc. Things happen that we don't expect. But she has the income to cover the rent, has a great co-signer and you have set up a buffer system with the double deposit. If I were you I would interview her myself, so I could get a good feel for her. After that I would let my instincts guide me. Hope your instincts is right.

@Brian Adzadi Thank you for your reply. Yes, she is fine except her credit score and the unknown any eviction case.  And yes, she has a co-signer that will cover her low credit score. I also need to ask my PM to make sure, is it mean only 2 persons live in there. One minor and herself. 

I like to take care my properties myself and do a face to face interview and see how she dress in order to get the feeling on how neat she is but I am living in oversea now. That's why all my properties are handling by PM.  

ONCE your accept co-signers you set a loop hole for anyone else that want's to rent that doesn't qualify.. so you'll need to let others rent with co-signers.

The only clause we had for using co-signer was if applicant was a student and then we would permit co-signers.

She wouldn't qualify in my standards.

@Peter Sik

I'll say this and leave it at that- it was one of the best advice I received from a experienced landlord- "NO tenant is better than a BAD tenant" Pick your tenants wisely, it could make or break your investment property. Set strict qualifications and do not deviate from it just to get a tenant in there. Better to lose money now to fill up a vacancy than lose a ton more in eviction/loss of rent down the road.

The problem with having a co-signer is that it does not eliminate the risk of late payments or having to evict. They can simply refuse to take responsibility and you still can not collect easily.

I would not accept this applicant but if you have zero other options and you wish to drop your screening standards never offer a risky tenant applicant a term lease. M2M only without exception if you want to stay in control. A term lease is a licence to be take advantage of and abused by your tenants. If a risky applicant is not willing to sign a M2M lease be thankful that you dodged a bullet.

This property posted in market for about a little more then a week. And this is the first applicant i received. The last tenant lived in this property 6 years and end up I need to spend ten thousand to repair everything.  A low credit score person means he/she is not a neat person (may be I am wrong in some cases) but i guess is right in general.  And I'm afraid the property may require high repair fee after the tenant moved out if that person is not neat.

Thank you all of the opinions. And I learned something about the co-signer. The decision is no to this applicant.

It's possible this tenant would be a good candidate, so I wouldn't be so quick to dismiss. A strong rental history is more important to us than a poor credit score. Until you know the factors that surround the poor credit score, you don't have enough information. Could be related to misreported accounts, credit report errors, identity theft, divorce that included joint accounts, or even legitimate accounts that had been settled or could be paid off quickly.

We've had terrific long term tenants who messed up their credit history and were forced to become long-term renters since they would never qualify for a home mortgage.  If the 5 negative reports are legitimate and for minor amounts, I would encourage the applicant to pay them off or get a payment plan going with the creditor. Owing money to cellular phone companies, student loan debt, and medical debt is common. Owing money to other landlords and utility companies unacceptable, as that has a direct reflection on their ability to maintain a successful tenancy.

We don't accept co-signers. If the tenant has a significant weakness in financial/credit history, but met all of our other requirements, we would offer to rent but would require a higher security deposit. I'm not interested in qualifying a co-signer and chasing them down should the tenant default. Having a hefty security deposit in the bank is much more beneficial.

Also, don't lock yourself into a 2-year lease. That will benefit the tenant more than you. We prefer month-to-month rental agreements. We don't need to deal with lease renewals and can change the terms of the rental agreement (including rent raises) with much greater flexibility. If the tenant doesn't work out, it's easier to terminate the rental agreement. Most of our tenancies last more than five years, with some that have passed the 10 yr mark and 20 year mark. All are M2M rental agreements. The best way to get and maintain great long-term tenants is to be a great landlord! Many great tenants would not even consider signing a 2-year lease, so you may be missing out of some of the market.

From our rental criteria:

FINANCIAL/CREDIT HISTORY

1.No outstanding debt to previous rental property owners.

2.No outstanding debt to utility companies.

3.No outstanding debt in excess of $1000 that is not in a payment plan.

4.No excessive monthly financial obligations - more than 20% of income.

5.Lack of credit history or marginal credit history may result in additional security deposit.

6.Derogatory credit (past due accounts, collections, charge off accounts, tax liens, judgements in excess of $1000 and/or bankruptcy) may result in additional security deposit or denial.

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