Property Manager refuses to pull FICO Credit Scores?

Rental Property Investor · Culver City, CA · Member since 2014 · 222 posts · 79 votes

I asked my PM to provide actual credit scores instead of just the credit history. I have a hard time deciphering various delinquent accounts etc.. and just want a Credit Score to evaluate a tenant.

The PM reply is below. Any thoughts about this?

"We chose not to get FICO credit scores when we employed a credit bureau and use a debt to credit ratio. The cost with FICO scores is much higher. My former Broker did not use FICO scores. We would have to increase our application fees and sign a new agreement with the credit bureau. None of our other owners have required FICO scores. I would estimate application fees increasing from $35 per adult to $55-$60. I don’t wish to be difficult, but I’m not sure FICO scores are feasible for these reasons. Our application fees need to be in line with those other property management companies charge."

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Cara Lonsdale

Realtor and Investor · Scottsdale, AZ · Member since 2017 · 1k+ posts · 1k+ votes

Originally posted by @Jeff T.:

@Cara Lonsdale Thanks for the input, yes, I do want the credit history, but I have a hard time objectively determining the credit worthiness of the applicant hearing a list of the credit information over the phone from the property manager.

If there is a list of items and they have a late payment from a few years ago and a cable collection, then some medical collection from 5 years ago, but everything else is good now.

I have a hard time judging that applicant objectively. I'm just asking for a FICO score that every lender uses to assess the creditworthiness of a borrower.

Like I said , there are good things about the PM for sure, but I feel there are some things which make things harder for me and also more expensive.

As a landlord, ALL you should care about is what is on that credit report that will get in the way of them paying your rent.

If they have late pays on a credit card that has a $15K balance, that may be a concern. If they have delinquent status on medical bills over $20K, that is a red flag. Huge car payment or two?

If they have some late pays 6 months ago on an account that has since been paid, that is nothing.

If they have an eviciton on their credit, no matter how long ago it was, that should be a huge red flag.

So, I guess what I am trying to convey is that YOU need to come up with the criteria that is most important to you. Keep in mind that YOU are NOT a lender. A lender looks at different criteria that you should be looking at. Equally important to note is that many of the tenants that may apply are renting because they can't buy. That 30 day late pay on their credit may be holding them up from obtaining a loan, but it shouldn't be an issue for them to rent.

FICO won't always tell you as a landlord what you want in order to compare tenants. It is built for lending, not for leasing.

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Bob Okenwa
Real Estate Agent/Investor · Peoria, AZ · Member since 2016 · 2k+ posts · 2k+ votes
8y
Get a new PM that does. Plenty of services and companies that will provide you with FICO scores as part of the credit check.
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Jeff T.
OP
Rental Property Investor · Culver City, CA · Member since 2014 · 222 posts · 79 votes
8y
@Bob Okenwa. Yeah, it's interesting that they don't give FICO scores and I've put up with it for a while. I find it hard to believe the part about increasing application fees and signing new agreements with the credit bureau.
I also think it is feasible, but I'm interested to hear what other landlords are doing and what the fees are?
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Kyle J.
Rental Property Investor · Northern, CA · Member since 2012 · 5k+ posts · 5k+ votes
8y
It costs me $10 to get a full credit report and FICO score when I’m screening applicants. Not sure why it would cost your PM so much or be an issue for them to get it.
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Jeff T.
OP
Rental Property Investor · Culver City, CA · Member since 2014 · 222 posts · 79 votes
8y
@Kyle J. Thanks for the input. I know, I have pulled credit scores for rentals I manage myself and they are not expensive. What service do you use to pull the credit?
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Kyle J.
Rental Property Investor · Northern, CA · Member since 2012 · 5k+ posts · 5k+ votes
8y
Originally posted by @Jeff T.:

@Kyle J. Thanks for the input. I know, I have pulled credit scores for rentals I manage myself and they are not expensive. What service do you use to pull the credit?
I use this service:
http://www.aoausa.com/mrlandlord.html
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Jeff T.
OP
Rental Property Investor · Culver City, CA · Member since 2014 · 222 posts · 79 votes
8y
@Kyle J. Ah, Mr Landlord. I've seen him speak :)
Thanks for sharing, I have a few issues I need to work through with my PM. They are honest and have a couple good handymen, but there are some things I need to try to change.
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Cara Lonsdale
Realtor and Investor · Scottsdale, AZ · Member since 2017 · 1k+ posts · 1k+ votes
8y
Sounds like alot of excuses. I don't see how the FICO score would be that big of a deal to obtain.
Although, I would also question why you think you need it? Isn't the credit history what you are really after anyway?
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Jeff T.
OP
Rental Property Investor · Culver City, CA · Member since 2014 · 222 posts · 79 votes
8y
@Cara Lonsdale Thanks for the input, yes, I do want the credit history, but I have a hard time objectively determining the credit worthiness of the applicant hearing a list of the credit information over the phone from the property manager.
If there is a list of items and they have a late payment from a few years ago and a cable collection, then some medical collection from 5 years ago, but everything else is good now.
I have a hard time judging that applicant objectively. I'm just asking for a FICO score that every lender uses to assess the creditworthiness of a borrower.
Like I said , there are good things about the PM for sure, but I feel there are some things which make things harder for me and also more expensive.
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Cara Lonsdale
Realtor and Investor · Scottsdale, AZ · Member since 2017 · 1k+ posts · 1k+ votes
8y
Originally posted by @Jeff T.:

@Cara Lonsdale Thanks for the input, yes, I do want the credit history, but I have a hard time objectively determining the credit worthiness of the applicant hearing a list of the credit information over the phone from the property manager.
If there is a list of items and they have a late payment from a few years ago and a cable collection, then some medical collection from 5 years ago, but everything else is good now.
I have a hard time judging that applicant objectively. I'm just asking for a FICO score that every lender uses to assess the creditworthiness of a borrower.
Like I said , there are good things about the PM for sure, but I feel there are some things which make things harder for me and also more expensive.
As a landlord, ALL you should care about is what is on that credit report that will get in the way of them paying your rent.
If they have late pays on a credit card that has a $15K balance, that may be a concern. If they have delinquent status on medical bills over $20K, that is a red flag. Huge car payment or two?
If they have some late pays 6 months ago on an account that has since been paid, that is nothing.
If they have an eviciton on their credit, no matter how long ago it was, that should be a huge red flag.
So, I guess what I am trying to convey is that YOU need to come up with the criteria that is most important to you. Keep in mind that YOU are NOT a lender. A lender looks at different criteria that you should be looking at. Equally important to note is that many of the tenants that may apply are renting because they can't buy. That 30 day late pay on their credit may be holding them up from obtaining a loan, but it shouldn't be an issue for them to rent.
FICO won't always tell you as a landlord what you want in order to compare tenants. It is built for lending, not for leasing.
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Alexander FelicePro Member
Guy with Great Hair · Austin, TX · Member since 2013 · 2k+ posts · 4k+ votes
8y
to be fair, you don't really need FICO scores.
I've been evaluating credit for a long time, the report is what matters. The credit score is like a house's Zillow value, it may or may not be useful, it might be an accurate representation of value, it might only be close. It doesn't tell the whole story, just a small non-contextual snapshot.
Work with your landlord, they have a good reason for saving the cost. Some concession from each party would serve you both well I think.
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Jeff T.
OP
Rental Property Investor · Culver City, CA · Member since 2014 · 222 posts · 79 votes
8y
@Alexander Felice I appreciate the input. I agree it's hard to boil down someone's credit history into a single number. I would like both actually.
How do you judge what you see in the credit report?
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Thomas S.
Member since 2016 · 13k+ posts · 12k+ votes
8y
The FICO score is extremely important as it gives a professional summery of the report. Financial institutions all use the FICO and if it's important to them it should be important to you. The fact is it gives a summery indicating the percentage probability of a applicant defaulting on their debts. This is exactly the information you need. After that you can then choose to examine the credit history report to further ascertain their worthiness if you wish. I consider both but give more weight to the score than the reason behind it. Reasons are really only excuses for poor money management.
Your PM is jerking your chain, you should question if there are other areas in which he is set in his ways and unwilling to be managed by you. Remember who is in charge.
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Alexander FelicePro Member
Guy with Great Hair · Austin, TX · Member since 2013 · 2k+ posts · 4k+ votes
8y
Originally posted by @Jeff T.:

@Alexander Felice I appreciate the input. I agree it's hard to boil down someone's credit history into a single number. I would like both actually.
How do you judge what you see in the credit report?
Honestly the biggest problem with credit reports is the formatting! They LOOK complex, but really the information is laid out for you quite usefully actually.
Credit reports tell a story. How much someone borrowed and when, and how they paid that debt. Simple yes, so if you see someone that miss payments consistently over time, you might not want to rent to them. If you see that 2 years ago they missed ALL their payments for 2 months then everything was fine after, you want to find out what in their life happened.
what about this example. you got 2 applicants, one with a 650 and one with an 800. On face the 800 is better, obviously.
the 650 is a responsible adult guy with a family and he got laid off, missed 3 payments on his car and credit cards 18 months ago. he's got a mortgage, few car payments, lengthy credit history, just that one hiccup. Now he's back to repaying, has 3x income, and probably a great candidate for tenancy
the 800 is my 27 year old fiancé who's high debt limit is an 8000 car payment that her mom makes for her. LOL. She has an 800 because her payments have been fine, but they are based only 8000 high credit. She's essentially a credit ghost
if you go by score, you might pick the wrong one.
There are more examples and intracacies but hopefully this helps.
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Thomas S.
Member since 2016 · 13k+ posts · 12k+ votes
8y
@Alexander Felice
In your example, after considering the scores, further examination of the report should result in rejecting both, the guy having only 18 months work history and the flakey 800 score with high debt.
Keep in mind there is no single screening tool to determine acceptance of a applicant but it should only require one bad item to be enough to reject. We are looking for reasons to reject applicants in screening not to find reasons to accept.
Both examples are high risk for different reasons. Neither is obvious from the score alone. 650 and up may be acceptable for a individual landlords screening standards and therefor would require further examination/screening to find reasons to reject. The score is simply a minimum start point.
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Alexander FelicePro Member
Guy with Great Hair · Austin, TX · Member since 2013 · 2k+ posts · 4k+ votes
8y
Originally posted by @Thomas S.:

@Alexander Felice
In your example, after considering the scores, further examination of the report should result in rejecting both, the guy having only 18 months work history and the flakey 800 score with high debt.
Keep in mind there is no single screening tool to determine acceptance of a applicant but it should only require one bad item to be enough to reject. We are looking for reasons to reject applicants in screening not to find reasons to accept.
Both examples are high risk for different reasons. Neither is obvious from the score alone. 650 and up may be acceptable for a individual landlords screening standards and therefor would require further examination/screening to find reasons to reject. The score is simply a minimum start point.
Exactly my point, maybe they are both ****, the score wouldn't have shown that.
You need reports much more than the score.
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Michaela G.
Investor · Atlanta, GA · Member since 2013 · 3k+ posts · 3k+ votes
8y
But the score can be so misleading. Here are 2 scenarios:
1) Applicant had 3 charge offs 3 years ago and owes 15K, but has since made payments on other accounts.
2) Applicant had 3 charge offs 5 years ago and owed 15K, but got into some money 6 months ago and paid all of it off.
Who do you think has the better score? Applicant 1, because the score is based on last account activity and if the charge offs happened 3 years ago, then every month the score has gone up a little since then
Applicant 2's score completely tanked when he paid off those charge-offs, because their last activity is now 6 months ago and whether a charge off is paid or not makes no difference to the score. The 7 year clock started over when he made those payments 6 months ago and it looks like new charge-offs.
2 Reply
Mags S.
Rental Property Investor · Phila, PA · Member since 2015 · 276 posts · 111 votes
8y
@jeff t Have the pm send you the credit history instead of reading it to you over the phone. Learning to understand it can only help you in this business. I agree, the format stinks
1 Reply
Nathan GesnerBusiness Member
Moderator
Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
8y
@Jeff T. my question is: why did you hire a Property Manager? Am I understanding correctly that you are involved in application screening and approval? If so, why don't you trust your property manager to handle this? Did you hire someone too incompetent to handle one of the basic functions of property management?
I manage 300 rentals. When owners inquire about my services, I explain my screening process in detail until an owner is satisfied that I am competent. I also make it very clear that I manage properties, not Landlords, and I don't need a babysitter. If a Landlord doesn't understand something, they are welcome to call or email but if they want to be involved in every aspect of management, they can take the property back or give it to another PM. I do not share applications or involve the owner in the screening process. In fact, I believe it is illegal for your PM to share the credit report with you. Here's a statement from Transunion:

You are hereby advised that all information in this report is confidential and may not be disclosed by you to any person other than Applicant, and then, only in accordance with the Fair Credit Reporting Act (FCRA)
I recommend you ask your PM to review the credit reports or talk to the provider and see if sharing them is a violation of the law. Some on BP argue that the PM can share it with the Landlord because he is acting on the Landlord's behalf, but I don't believe that's the intent of the law.
I will only contact the owner after an application is approved and the tenant puts money down to secure the rental. Then I provide a brief summary of the new tenant:
"Hi, Joe. We have an approved application on your rental at 123 Garland St. It's a family of four with a single dog under 20 pounds. They move in March 18th on a one-year lease at $1,250 a month."
The majority of my owners don't even get that because all they care about is getting the check in the mail.
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Jeff T.
OP
Rental Property Investor · Culver City, CA · Member since 2014 · 222 posts · 79 votes
8y
Thanks for all of the input everyone. I'm still trying to sort out how to best deal with this. As I said, I have some issues with the PM, but some of them may be self inflicted.
I may be getting too involved in some areas and not involved enough in others.
@Nathan Gesner You make a good point. I think part of the issue is I don't completely trust the PM to make the same decision that I would. Sometimes the PM likes to give people starting out "a chance", without prior credit history and that has cost me before.
So there's a question. How do you treat applicants with little to no prior credit history?
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Nathan GesnerBusiness Member
Moderator
Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
8y
@Jeff T. I think your first priority should be to find a PM you can trust.
Every background screening should be viewed as a risk assessment. The higher the risk, the more steps you take to mitigate that risk.
I use a score sheet and award points based on various objective factors that represent risk: credit score, collections, judgments, evictions, criminal record, rent-to-income ratio, length of tenancy at last rental, number of late payments, length in current job/career, and so on.
If they have no credit, that would lower their score which shows an increased risk. Likewise, they could have really good rental history and credit but they just started a new job. Based on their score, I may approve their application but mitigate the risk by charging more to move in. I normally charge first month's rent and a deposit equal to rent but a higher risk tenant may pay 1.5x rent or 2x rent for the deposit. This makes it more difficult for them to afford to rent, which screens out the shady ones. Very few people will walk away from two month's rent.
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Jeff T.
OP
Rental Property Investor · Culver City, CA · Member since 2014 · 222 posts · 79 votes
8y
@Nathan Gesner That's good input. It's interesting, because I've stayed with the PM for a long time because I do trust them, at least in the sense that they are honest and would never steal and don't do things to purposely inflate prices or anything like that. So the trust we are talking about is a little different I guess in the that I don't trust that their judgement of tenants is the same as mine.
It's also interesting that you bring up deposits, because I've been experimenting lately with higher deposits. The standard is one month and I find that I always lose on moveout because the rents are $500-$900 or so and that doesn't cover much. The last 2 I've charged 1.5 months deposit. I think I will continue with that as the rental market is tight.
I'm considering going with a large PM that is in multiple states and is growing into my smaller market. Well actually it's Andrew Propst's PM company from the latest BP podcast. I still need to look into the company more, though.
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Jeff T.
OP
Rental Property Investor · Culver City, CA · Member since 2014 · 222 posts · 79 votes
8y
@Michaela G. @Alexander Felice @Mags S. @Thomas S. @Cara Lonsdale I appreciate the input, it's helpful bouncing things off of the knowledgable BP crowd :)
Any further thoughts are appreciated.
One other question I just thought of, how to vet a new PM and how to transition from the old without hard feelings.
Ok, that's 2 questions....
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Nathan GesnerBusiness Member
Moderator
Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
8y
As a member of NARPM, I'm pretty familiar with Andrew and he's a smart guy with a good company.
I know plenty of people that are 100% honest but incompetent. I'm not saying your PM is, I just saying there's more to consider than just honesty. I hope you find someone soon.
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Jason D.
Rental Property Investor · St. Petersburg, FL · Member since 2017 · 3k+ posts · 4k+ votes
8y
What I would ask you is how are the tenants that they have been providing you? Has their screening been sub-par? My PMs have screened and placed tenants and I don't even look at the application. If you are having problems with the tenants that they have placed I your units, find a new PM. If you are satisfied with their placement of tenants, why rock the boat, they are serving you well.
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Jeff T.
OP
Rental Property Investor · Culver City, CA · Member since 2014 · 222 posts · 79 votes
8y
@Jason D. Ok, good question about the quality of the tenants they have been providing... A little tricky to answer. One of the issues I have with the PM is they say they can only take one application at a time (or more, but only if they are turned in the same day). Maybe this is true, I don't know, but if I get a marginal tenant that I need to get more information on. Maybe they stayed with relatives so don't have a recent landlord reference, so we have to go back and forth to get an older reference or have some difficulty getting some of the information.
So then I have to wait on that information or reject them in order to get the place back on the market.
They say they have to review them in order. It seems very inefficient. Another PM said that the first one to provide all of the necessary information to approve and the funds gets the place, so it's not just one at a time.
How do other people screen and take applications? The property is in Florida
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