I recently bought a duplex and have received an application & deposit to hold from a newly engaged couple moving to my area. Based on the results of a background check I found that neither potential tenant has a history of evictions and they both have verifiable and reliable income. One of them has decent credit and the other has no credit history at all (she is 22 and a new college graduate). Should I overlook the lack of credit history and rent to them anyway? Should I require that she have a guarantor? Any input would be appreciated!
What’s the rent rate and their combined gross income? What’s his credit score ? If it’s well above 3 Times the rate and his credit is 620 or above I’d rent to them
Personally I love it when they have a 0 credit score (as long as they have proper income and clean criminal). They have NO DEBT.
I'd much rather have a 0 credit history applicant than someone with a high score and a high car payment. They will make their car payment before rent. I've walked past new Mustangs in the driveway while posting rent default notices. Go live in the car I tell them.
Caleb, thanks for the quick response! The rent is $1,250 per month and their combined annual income is $59,000 ($4,900 per month) so they make more than 3 times the rent rate. His credit came back around 630
I would bet that many of us had no credit history at that age.
Considering the tenants age and the fact she does not have debt I would not worry so much about the lack of credit history. You mentioned that the tenants will be moving to the area so I would just want to make sure they can commute to their jobs from the new location or that they have jobs lined up in your area so that they can afford the rent.
@Dave Bopp are you able to confirm past rent payments with former landlords?
If you are able to do that then I’d rent to them. I myself am similar in age (early 20s) but my credit score is above 700 and I own several rentals plus I have a lengthy verifiable history as a tenant myself (currently rent). Point is it can vary a lot and if you can confirm past rent payments with former landlords I’d rent to them
My current tenants fall under this same situation almost exactly. Going on month 5 without a single missed payment and been great tenants. If they have good income and check out other ways I would take the chance on them, especially being so young it is not a surprise they have no credit history.
These two applicants have more red flags than just no credit score. Their life situation is high risk although there is likely a lot of information you have no included in your post.
630 is NOT by any stretch a good credit score.
With no additional information I would reject these applicants .
@Dave Bopp Check the current and prior landlord. Both will say a lot about their paying history. If no current or prior landlord, I usually don't pursue it and keep collecting applications. Good luck!
@Dave Bopp No credit I think is a larger red flag if they also are marginally employed or in a non-traditional line of work. The kind of applicant I see this being a problem for is one that likely operates on a cash basis and doesn't have a bank account. If the tenant has a college degree, a salaried position and is relocating for work then you'll have the responsibility of training them a little, perhaps. But from what you're saying on paper they'll be a tenant most people would be happy to rent to (if they're still renting) in a few years with more credit history under their belt. Use some of your landlord sense here -- how they conducted themselves -- and make your call from that.
Isn't it a sad state of affairs when we look down on someone who lives as a cash and carry standard? That is really too bad. Unfortunately, our credit system works like this. We have to PROVE that we can manage debt in order to be considered creditworthy.
Considering her age, and recent graduation from college, I find it rather IMPRESSIVE that she hasn't gone out and signed up for every credit card that students get offered like candy on college campuses these days. From the moment my daughter turned 18, we have been FLOODED with pre-approval credit card offers addressed to her, and she tells us that they basically hand out credit cards at school. YIKES.
This is a good opportunity for you to establish a policy in case it comes up in the future.
For us, we would rent to them. 630 is decent credit. Income is good, and you said verified. No debt? Man, this would be a no brainer.
We recently rented to a young couple in a similar situation (no rental history, no credit), and it was wonderful! If anything, they were A+ because they wanted to build a strong relationship with us for future rental references, and may be a bit nervous since it was their first rental. I say if everything else makes sense, yes! We always focus on income/job stability, as that's what going to pay the rent!
Thank you all for the input! I was able to get in touch with their previous landlord and was told they were clean, polite, and paid on time. With that reassurance, the lack of credit history seems like much less of an issue. I appreciate the guidance everyone!
Create Lasting Wealth Through Real Estate
Join the millions of people achieving financial freedom through the power of real estate investing