@Georgee Gilbert To be 100% honest with you I don't look at credit scores as much as I look 4 things.
1. What is ON the credit report
2. Debt to income ratio (along with high balance on any credit cards within last 2 years)
3. Eviction report
4. Job time (are they bouncing around a lot or are they stable)
The reason being is that just looking at the credit score, that does not tell the whole story. There are 5 factors that determine credit scores, so sometimes that score means nothing to me. Also with any of my tenants with low credit scores, I work with a credit restoration company that builds the tenants credit scores up while in the house and they add the rental history to the credit report as well. My tenants are very grateful to be given this education on top of being able to move into a nice house while doing so. Knock on wood but I have not had to evict anyone since 2011. That includes apartment units and homes.
@Georgee Gilbert You will get it rented more quickly if you have a lower credit score, but then you will have a riskier tenant. Given that Michigan law fixes the max security deposit at 1 1/2 month's rent, you are not able to offset that risk with higher deposit, like you can in other states.
If you want to broaden your pool of potential renters, consider ones whose credit was damaged by unusual circumstances that are not likely to repeat. For example, credit was damaged by major medical bills. I would still avoid people that skip bills regularly, have evictions, or felonies, particularly violent ones. Just be careful to document your criteria and stay legal.
You say it is working class housing but $1050 in Metro Detroit isn't anywhere near the low end of the range. You may be able to get 650 in that area. Where is this property?
I have heard 600 credit score is a good minimum for a working class area. If it's a more desirable area, maybe 650, but look at their whole picture and make sure it makes sense. We stress employment/stability as the most important factor.
Linda D, it's a very nice home with all appliances plus washer and dryer including. Everyone who has seen it liked it a lot but their credit score is too low.
Geez, I would struggle qualifying for that property...I check evictions, income, and job history, I also take a peak at collection accounts see if its a habit. I also, look at their car payment size. I have had 1 non-payment in 5 years, and 5 late payments spread over dozen+ rentals.
Credit scores are super tricky because your can have a piss poor credit score, but never missed a payment or having missed a payment in years. I have a 630-675 credit score because lots business debt is carried as personal debt.
Me personally, I would be more concerned the applicant had income of at least $3500/mo, and has had it for at least a year and they have $5-$8K in savings in the bank.
I think 650 is high in that range they can easily qualify for a mortgage and would be more likely to be looking to buy a house. We pay more attention to the content of the report instead of focusing on the number.
@Georgee Gilbert To be 100% honest with you I don't look at credit scores as much as I look 4 things.
1. What is ON the credit report
2. Debt to income ratio (along with high balance on any credit cards within last 2 years)
3. Eviction report
4. Job time (are they bouncing around a lot or are they stable)
The reason being is that just looking at the credit score, that does not tell the whole story. There are 5 factors that determine credit scores, so sometimes that score means nothing to me. Also with any of my tenants with low credit scores, I work with a credit restoration company that builds the tenants credit scores up while in the house and they add the rental history to the credit report as well. My tenants are very grateful to be given this education on top of being able to move into a nice house while doing so. Knock on wood but I have not had to evict anyone since 2011. That includes apartment units and homes.
We accept a no credit score on many of our buildings. The main thing on credit we look at is do they owe people money. We take the amount they owe others and count it towards the rent amount. They still need to be 3x rent+outstanding debt to secure the place. You can charge double deposits on questionable tenants.
Georgee Gilbert. I do not ask for a specific credit score, but I do state ‘acceptable’ credit. I do all the other checks, using smart move. Verifiable income and verifiable employment.
Too many other factors to base your decision on credit score alone. Length of employment, other depts. and so on. I had a 38 year old that said he was at his job a long time, 6 months. Nope. I rented to a 20 year old that was at her respectable job for 2 years. Low credit score. Great tenant. Clean & pays rent on time. Consider the whole package.
I asked my PM this question the the other day and they said their minimum is about 550 and the average is in the 600s, across 500 plus units.
I’m a landlord but I am also a renter, so I’ve been on the other side of this too. One apartment I rented (to live in) last year, the owner wanted to charge me two months security deposit because I hadn’t been working in the area.
I told them I wouldn’t do that. My credit score is above 700 and I’ve never been late on any payment of any kind. I got them down to one month rent deposit, but my point is don’t over do it either.
I’d focus more on them earning 3X rent more so than their score. In my case my income was almost 9X rent which means it’s highly, highly unlikely I’ll ever skip out on rent
Thanks you all. Your input has really helped. When I rented my first house a PM leased the home to a person with poor credit and I got burned. I since then fired the PM and evicted the tenant. Now, I'm a bit gun shy of tenant with low credit scores. I will reevaluate my process and find what best fits each property. Thanks again.
As some have already noted, credit is only part of the equation. Those with great credit scores don't necessarily equate to a great tenants. I personally recommend using a "decision report" service whereby the tenant has to pass a certain level of criteria for credit and criminal histories. (I can recommend one if you want to contact me via BP message.) A score, as others have said, doesn't really give you a good picture of the rental worthiness of a prospective tenant. Scores may have nothing to do with what makes or breaks a good tenant relationship. The applicant's rental history, criminal history and current employment status are, at times, a much better indicator of risk. With all that said, if you're getting a full credit report on someone, reviewing and understanding the details and how the info might impact the tenant's ability to pay rent and utilities is what makes the difference.
I would look not only at the score but the history. If you looked at my credit I have 0 late payments in over 15 years, nothing is behind, no collections, judgments, etc. But My score hovers around 630-680 because I have a lot of new credit (not being used), student loans, a vehicle, a mortgage, several utilities in my name, etc. You would miss out on a great tenant if for some reason my score went lower. Don't just look at the number, look at payment history.
B working class I would never go below 650. I expect my tenants to be financially responsible regardless of their income level. Credit score should not be expected to mirror a tenants income level. Setting low standards for your tenants is only setting yourself up for failure by increasing your risk threshold.
Although my minimum requirement is 650 the majority of my tenants are well above 700, many over 800.
I care less about my tenants income level than I do about their money management history. The lower a applicants credit score the higher potential risk a landlord exposes themselves to.
Credit score is obviously only one factor and some with scores over 650 are still a high risk based on their credit to debt ratio. I have reject applicants that have good scores that are living at their maximum credit limit.
B working class I would never go below 650. I expect my tenants to be financially responsible regardless of their income level. Credit score should not be expected to mirror a tenants income level. Setting low standards for your tenants is only setting yourself up for failure by increasing your risk threshold.
Although my minimum requirement is 650 the majority of my tenants are well above 700, many over 800.
I care less about my tenants income level than I do about their money management history. The lower a applicants credit score the higher potential risk a landlord exposes themselves to.
Credit score is obviously only one factor and some with scores over 650 are still a high risk based on their credit to debt ratio. I have reject applicants that have good scores that are living at their maximum credit limit.
You guys are give me much to think about. I like the idea of good credit and actually looking at their history and income. Yes, I will make sure I look at the whole pic. I've only rented to those with 700's and I've never had a problem. They have actually been great tenant. The one tenant a PM placed with bad credit was a nightmare. My desire is responsible tenants.
I would look not only at the score but the history. If you looked at my credit I have 0 late payments in over 15 years, nothing is behind, no collections, judgments, etc. But My score hovers around 630-680 because I have a lot of new credit (not being used), student loans, a vehicle, a mortgage, several utilities in my name, etc. You would miss out on a great tenant if for some reason my score went lower. Don't just look at the number, look at payment history.
Yes Ray, you would be a great candidate. You need a place to stay. I have a 3 bedroom for rent. Lol JK😉
As some have already noted, credit is only part of the equation. Those with great credit scores don't necessarily equate to a great tenants. I personally recommend using a "decision report" service whereby the tenant has to pass a certain level of criteria for credit and criminal histories. (I can recommend one if you want to contact me via BP message.) A score, as others have said, doesn't really give you a good picture of the rental worthiness of a prospective tenant. Scores may have nothing to do with what makes or breaks a good tenant relationship. The applicant's rental history, criminal history and current employment status are, at times, a much better indicator of risk. With all that said, if you're getting a full credit report on someone, reviewing and understanding the details and how the info might impact the tenant's ability to pay rent and utilities is what makes the difference.
Good luck!
Clay
Clay, I agree. I just rejected an applicant with a 730 but their income was low and they didn't really have a strong credit history.
I asked my PM this question the the other day and they said their minimum is about 550 and the average is in the 600s, across 500 plus units.
I’m a landlord but I am also a renter, so I’ve been on the other side of this too. One apartment I rented (to live in) last year, the owner wanted to charge me two months security deposit because I hadn’t been working in the area.
I told them I wouldn’t do that. My credit score is above 700 and I’ve never been late on any payment of any kind. I got them down to one month rent deposit, but my point is don’t over do it either.
I’d focus more on them earning 3X rent more so than their score. In my case my income was almost 9X rent which means it’s highly, highly unlikely I’ll ever skip out on rent
@Georgee Gilbert To be 100% honest with you I don't look at credit scores as much as I look 4 things.
1. What is ON the credit report
2. Debt to income ratio (along with high balance on any credit cards within last 2 years)
3. Eviction report
4. Job time (are they bouncing around a lot or are they stable)
The reason being is that just looking at the credit score, that does not tell the whole story. There are 5 factors that determine credit scores, so sometimes that score means nothing to me. Also with any of my tenants with low credit scores, I work with a credit restoration company that builds the tenants credit scores up while in the house and they add the rental history to the credit report as well. My tenants are very grateful to be given this education on top of being able to move into a nice house while doing so. Knock on wood but I have not had to evict anyone since 2011. That includes apartment units and homes.
I would use the credit score as a tool but not definitive. Get creative and use your gut. For example, when a prospective tenant comes to look at an apartment, walk them back to their car and observe. Is it a mess inside? If they don’t respect their own stuff do you think they will respect yours? Little things like that can help form your opinion and give you better odds. In the end, use your gut feeling.
I would use the credit score as a tool but not definitive. Get creative and use your gut. For example, when a prospective tenant comes to look at an apartment, walk them back to their car and observe. Is it a mess inside? If they don’t respect their own stuff do you think they will respect yours? Little things like that can help form your opinion and give you better odds. In the end, use your gut feeling.
There is a lot of debate on this topic here in the forums, but in working class neighborhoods I state the minimum credit score requirement at 600. It is important to let tenant candidates know that this is just a minimum.