What credit is bad credit

Question

Hey guys!

Looking for tenants for my first investment property in GA.  I have received 5 application so far and almost everyone has a low 500 credit score. Some had eviction history and I just rejected them but I want to know your thoughts on renting it to someone with 500ish score.  - part of me feels that if that person had perfect 700+ then that person would be a buyer and not renter and then other part says that it is better to leave the place empty than going through evictions.

Really appreciate your thoughts on this.

Thanks

V

Jill F. · Answer

I have some super tenants (and they'll likely be tenants for a longtime since personal finance is not a strong suit) with really crappy credit scores.  As long as they have 3.5x rent in income, a decent employment history, no evictions and no landlord judgements I don't care about credit score.

However, I only offer term leases to people with over 700 since the only thing keeping someone in a place when they want/need to leave early is caring about their credit score or lack of money to buy out the term. Really a lease provides way more protection to a tenant than to the landlord...

Michael Julian · Answer

I don't look at the FICO number, but at the data itself. I rent to a family on the Dave Ramsey Plan that has no credit score at all as they have no debt and have not borrowed money for some time. They do, however pay their bills on time and have no negative credit. I am good with that.

Julian Sibley · Answer

@Vishwas He I think you should listen to Chris' advice ^ and try to look at why their credit is bad. Also, are there any compensating factors?? Strong work history, co-applicant w/ a job, what did their previous landlords say, how much income do they make compared to your rental amount, etc.

We currently have some renters that were in a similar situation, but they have good income, and most of the derogatory credit was from the past (5+ years ago). They're some of the best renters we've had and always pay their rent on time. Life can be uncertain and not everyone is given the same opportunities, but if you put in your due diligence when screening them, a low credit score doesn't necessarily mean you will have to evict them.

Chris Szepessy · Answer

I think a lot of landlords look at why their credit is bad.  Is it unpaid hospital bills or unpaid utility bills, cell phone bills, etc.?  Even the most responsible people can have a hard time paying thousands in  hospital bills, but not paying utility companies usually comes down to just wanting to spend the money elsewhere.  But again, every situation is different, but at least this may be a starting point for you.

I used to think the same way...if someone has a 700+ credit score, they would just buy a house.  I now realize that a lot of people may not want to be tied down to an area for years or they just like the "care free" living when it comes to renting.  It's easier/cheaper to just call the landlord when there's a problem instead of calling a plumber/electrician/etc.

Alexander Felice · Answer

Score is marginally useful at best

read the report, find the story of how this person treats their debtors.

I'll take a strong 600 over a weak 800

anything under about 525 is super subprime

Lasandra Sutherland · Answer

In My experience sometimes credit score can be misleading.  Like Michael said look at the data its self. If your potential need help with removing inaccurate information from their credit report just message me. I'm partnered with a great company that has never let me down.

Thomas S. · Answer

I have a long list of requirements and learned a long time ago that flexibility on your standards is a recipe for failure. My minimum requirement credit score is 650. I do not care if a applicants score is 649 it means they fall below my minimum standard and are rejected.

Whether a applicant has fallen behind on medical bills, phone, hydro or car payments is irrelevant. They fell behind because they did not keep up their payments on time and usually the first one to suffer will be he landlord. 9 times in 10 a tenant with withhold a rent payment before they will risk missing any other bill payment.

The only acceptation I ever even consider is a recent divorce. The reason being that a divorce causes financial issues that are often due to circumstances beyond a individuals control that they can rapidly recover from once they become stabilised.

I do consider the entire report however if the score does not meet my requirements I am not going to compromise otherwise what is the point of having screening standards. To mitigate risk you adhere to all your standards or don't bother having any.

Every single post on here regarding tenant's not paying rent will inevitably lead back to a landlord that did not adhering to strict screening standards.

Jenifer Kynor · Answer

Hi Sachin,

I definitely would not rent to anyone if you didn't feel comfortable with their credit score. You're right it is better to leave the place empty then to suffer through the eviction process. It is best to stick at a number you are most comfortable with.

The company I work for considers above a 560 as an approval recommendation for landlords. If you are comfortable with approving someone with a score under 700,  suggestions I have would to try to better understand their credit report by asking questions. For example;  Do they pay late on their credit cards or do they have old bill in collections they are currently working on paying off?  You could also ask for more of a security deposit.

Whatever you decide to do, just follow your gut feeling and set your criteria at something you feel good about and are comfortable with. Good luck!

Chinmay J. · Answer

There are 2 types of renters..

• People who NEED to rent because they will never have their life together to be able to afford, even a pot to pi$$ at times, let alone a house.  Half of these people live from paycheck to paycheck. They don't even have a bank account for crying out loud. What's credit score ? lol
• Then there are people who want to rent because of various reasons like 

Just got divorced, but have a decent job and incomeJust moved to a new city and don't want to buy just yetJust graduated from college and got a new job, and rather wait to buy
• Just got divorced, but have a decent job and income
• Just moved to a new city and don't want to buy just yet
• Just graduated from college and got a new job, and rather wait to buy

• Just got divorced, but have a decent job and income
• Just moved to a new city and don't want to buy just yet
• Just graduated from college and got a new job, and rather wait to buy

The latter category will not typically live in B or C neighborhoods.  Also they will typically rent only for a year or two and then be on their way, because they understand owning is better than renting.

That's why if you are buying in B or C neighborhoods (for cash flow purposes) you are better off going with Section 8. As long as the person is decent and not some hoodlum... That's all you care for. The county/city will pay you always on time. Also these recipients of welfare, will live there forever.. Usually I despise welfare, but do like when it benefits me through voucher programs...lol

I have been blessed with some pretty good tenants so far (for most part), but eventually when they move out, I am converting all my properties to Section 8, and almost as a rule I will only accept Section 8 going forward.

What credit is bad credit

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