No one with good enough credit

78 Replies

Hello all, hope all is well. This rental has been on the market for 15 days and after 48 leads no one has qualified. Due to no one having 600+ credit score. 

There is a married couple, with 2 kids that claim they have (570 credit score), that their credit issues are over 5 years old, both are holding jobs for over 3 years, with enough income to cover rent, and they are willing to provide a co-signer.

Should I just continue to wait for the application that qualifies completely or should I look into this one more? 
I've never had a co-signer before and don't know how that all works out. (some experts have said to no do that since it leads to other legal issues.)

I'm wondering what your experiences have been?

I don't like to leave my house sitting empty, I'm camping out there so it doesn't look empty and that is getting tough on me. Wish I could find an old car to park there...

Thanks for listening, your advice is appreciated!

570 credit score with issue over 5 years old, no possible way, they are lying. If you do the credit search you will find the truth and it will not be good. They are below 600, reject.

Never work at making any applicant qualify.

First lesson in screening applicants is never compromise on screening. A vacant unit is hands down better than any bad tennat. No applicant with a score below 600 is financially responsible. Make sure when you do find a acceptable applicant that you do not offer a term lease. M2M only if you hope to survive in this business.

@Thomas S. - I think it depends on the issue that caused the bad credit. Was there an extended illness? A divorce? When I divorced I discovered my x had taken credit cards through our joint bank account. Racked up a sizable sum and my credit went down because I had to settle them. But I was never late a single time on my mortgage and although it took years, my credit recovered. 

I’d pull the report and see what’s on there. Dig a little deeper. 

You are renting them an apartment not trying to give them a mortgage or sell them a car. If you have screamed 45 prospects and all have bad credit scores you are obviously in a bad area. Find someone with income that qualifies and see if you can get a double security deposit. With that much money at stake most tenants will work hard to stay on time. If they don't, you have enough money to get them out without losing your shirt. Try to find someone with a good strong rental history at your price point that's the real key. How do they prioritize paying rent over everything else

I think @BOB CRANEY hit the nail on the head  its the area .. my folks i deal with in these areas.. fico is not a criteria.. its 

do they pay their cell on time.. are they felons.... you have to triage the bad credit or sell the house. 

600 up probably does not want to live in that area.  I suspect thats whats happening.

I don't look at credit score per se.. I have one lady with a 475 credit score.. but all her accounts are current and she pays every bill on time.  Her bad score is mostly due to education loans that she had not been paying till she secured a job and a nasty divorce 3 years ago.

I get a lot, in my area, with bad credit scores but when I look the literally pay all their bills except their student loans which they pay on and off.  I put more stock in what they are paying and what their landlords say.

Originally posted by @Luke H. :

Hello all, hope all is well. This rental has been on the market for 15 days and after 48 leads no one has qualified. Due to no one having 600+ credit score. 

There is a married couple, with 2 kids that claim they have (570 credit score), that their credit issues are over 5 years old, both are holding jobs for over 3 years, with enough income to cover rent, and they are willing to provide a co-signer.

Should I just continue to wait for the application that qualifies completely or should I look into this one more? 
I've never had a co-signer before and don't know how that all works out. (some experts have said to no do that since it leads to other legal issues.)

I'm wondering what your experiences have been?

I don't like to leave my house sitting empty, I'm camping out there so it doesn't look empty and that is getting tough on me. Wish I could find an old car to park there...

Thanks for listening, your advice is appreciated!

 Others speculated on the area, another possibility is the price. If you are charging too much, it's possible that the well qualified people are looking elsewhere, and you're just getting the desperate. 

I don’t check credit. They all have bad credit. I verify income=4x rent and put them on bank draft. I also look inside their cars to see if they are messy or smoke cigarettes.

Originally posted by @Chris Mason :
Originally posted by @Luke H.:

Hello all, hope all is well. This rental has been on the market for 15 days and after 48 leads no one has qualified. Due to no one having 600+ credit score. 

There is a married couple, with 2 kids that claim they have (570 credit score), that their credit issues are over 5 years old, both are holding jobs for over 3 years, with enough income to cover rent, and they are willing to provide a co-signer.

Should I just continue to wait for the application that qualifies completely or should I look into this one more? 
I've never had a co-signer before and don't know how that all works out. (some experts have said to no do that since it leads to other legal issues.)

I'm wondering what your experiences have been?

I don't like to leave my house sitting empty, I'm camping out there so it doesn't look empty and that is getting tough on me. Wish I could find an old car to park there...

Thanks for listening, your advice is appreciated!

 Others speculated on the area, another possibility is the price. If you are charging too much, it's possible that the well qualified people are looking elsewhere, and you're just getting the desperate. 

Those that are desperate will fill out applications at multiple properties because they are hoping somebody - anybody - will take them. Beware of these types; a number of years back I had an application from a desperate somebody who had nine landlord tenant filings (AKA eviction filings), and when I contacted them to inform that I would be declining them, they replied it is OK because they found a place that would take them.

I don't really care about credit score. Many (most) of my tenants have bad credit and most are really good tenants. If a prospective tenant has adequate income, a good rent payment history, no evictions and isn't likely to benefit hugely from bankrupting, I'll accept.

It's not just credit SCORE; you should see why their score is low. For example, someone could have a bankruptcy that's a couple years old or medical bills (very common) or high student loans. Just because the score is low doesn't necessarily mean they should be automatically denied.

I get applicants all the time that are below 650, many below 600. But if they have good, steady income and good Landlord references, they may be excellent renters that will stay put for a long time because they can't qualify to buy.

There's nothing wrong with taking "risky" tenants as long as you mitigate the risk and have solid processes in place for when they fail. If they have bad credit due to something that happened more than two years ago, you should have no problem accepting them with first, last, and deposit of one month.

If their credit score is above the Low 500s I think that’s fine. What matters more than the score is what’s causing it. Late medical bills for example may be okay or a divorce. Or late student loan. What’s not okay is prior evictions, judgements or bankruptcy (recently). If they don’t have any of those things and make 3x rent and provide good references from previous landlords then it’s usually fine

Originally posted by @Luke H. :

Hello all, hope all is well. This rental has been on the market for 15 days and after 48 leads no one has qualified. Due to no one having 600+ credit score. 

There is a married couple, with 2 kids that claim they have (570 credit score), that their credit issues are over 5 years old, both are holding jobs for over 3 years, with enough income to cover rent, and they are willing to provide a co-signer.

Should I just continue to wait for the application that qualifies completely or should I look into this one more? 
I've never had a co-signer before and don't know how that all works out. (some experts have said to no do that since it leads to other legal issues.)

I'm wondering what your experiences have been?

I don't like to leave my house sitting empty, I'm camping out there so it doesn't look empty and that is getting tough on me. Wish I could find an old car to park there...

Thanks for listening, your advice is appreciated!

I left a property empty for 5 months because I couldn5 f7nd a tenant that passes requirements. The very few that initially passed  but fell apart when I started digging in the incomes

For example applicant stated 130k a year income. Self employed. Asked for tax returns, came back with a verbal I write off 100k. So your income is really 30k

Another applicant started to make demands like wanting the kitchen repainted because they didn’t like the color. Then they thought my deposit was too high and wanted to negotiate it. Then wanted to negotiate the  rent amount. Then they wanted to start negotiating the lease clauses. I basically told them I’m not interested. He thought because it was “winter” time he could basically demand anything. Found out different.

95% of the applicants i declined based on too low a credit or not enough income. But I’ll leave a unit empty before i just throw a body in there to generate income. I’ll take the hit.

What you need to do is see where your acceptance policy lines up to the typical renters in the area. Regardless you want to run a background on any applicant over 18. I wouldn’t put too much stock in a co-signer simply because it’s a tough thing to enforce. And even if you go to court you’re still not getting any money.

If a tenant needs a co-signer they are pretty weak financially so it’s best to decline. 

15 days isn’t that long on the market. 

@Luke H. How are these applicants' rental history? Does income fit the bill? Sometimes people pay rent and allocate their irresponsibility to their credit cards instead. Does this type of tenant appear standard to the area? Have you spoken to other investors or perhaps property managers that are experienced selecting tenants in this area? 

I'm a gigantic advocate of finding a good (big asterisk on good) property manager right out of the gates. Mine has a large waiting list of tenants that exclusively rent out of her portfolio because they know they will find the right placement for them and they trust her abilities to care for the property in working class neighborhoods, when often times rental properties are in substandard condition. She also has things like full time maintenance staff that make rehab ultra cheap for me. What's preventing you from using a manager?

Looking at the report is important - in shocked by how many folks have sub 600 credit driven almost 100% by student loans.

If the reason is something explainable then it may make sense to take other factors into consideration and get a larger deposit to offset credit score. If they are just shy of the cutoff and everything else looks solid, you will prob be ok.

That said, I’d give the process at least a month before you start bending your rules. Tenant quality should get better as summer approaches - most people want to move when it is warm and/or when school is on break.

If you wait for someone with a 600+ credit score, you'll be waiting until Gabriel blows his horn. Bad credit seems to be pretty universal these days.

The big three credit killers are student loans, medical bills, and divorce. 

I'm more shocked when I see a good credit report. I recently approved a young lower-income couple. They have a disabled child so the wife stays at home and they get by on the husband's income plus a monthly SSI check for the child. They both had a 700+ credit score. You could have knocked me over with a feather on that one.

@Luke H. Finding a creditable tenant is what some of us Landlords focus on.But, sometimes credit don't really tell the whole story about the individual. That's why we do our due diligence, employment screening, past residential screening, etc.Talk with the applicant, be upfront with them, get to know the person(s). You'll be surprised by what comes out from that conversation. Sometimes itll be positive and also a dud! From there, that's another option that you can use to determine, if it's a go or to move on and wait for another.

Based on the information you provided, I am guessing this property is in a bad area.  You will want to adjust your screening criteria. 

Focus more on people who meet the income guidelines you have set, their credit report shows they pay their monthly household bills, and whom are not felons. 

The fact of the matter is that is typically the best you can do in bad areas. Just is a byproduct of doing business in neighborhoods like that.

We tend to look at anyone over a 500. What we look at are what have they been late or delinquent on? How long ago? Is there car current? Most folks will pay their rent/mortgage (to avoid being homeless) before just about any other bills. So if they're late on a store card to Macy's we try to be understanding. 

We do look at job history and prior landlord experience. 

I would suggest running a skip trace on all of your applicants that will also pull where they've lived. I'd rather have the tenant who's been somewhere 8 years than the one who moves every 6 months. 

Just my $0.02

Keep in mind that when a landlord sets a minimum credit score requirement when screening and then accepts a tenant with a score lower than their base standard they have voided their screening standards. If you are screening based on why they have the score rather than maintaining a minimum credit score you can not have a minimum requirement. If you want to have your screening standards hold up in court never set minimum standard requirements. They are voided as soon as you ignore your own standards. Legally you can not have your cake and eat it too.

Never set screening standards that you can not adher to.

I don't look at scores, instead I look at the credit history.  If I see a short time period when all the hits happened and they have been solid for the last 3 years I approve them 

I never check credit scores.  I care about NO Evictions, NO Felonies, Verifiable INCOME and employment, and references.  I do check online court records, verify the current landlord they list actually owns the property, and verify all other info.  If I find even one lie, they don't qualify.

My personal credit score dips to barely 600 at times during the year, because I may have $50K+ on credit cards while taking advantage of ZERO Interest offers, I like using that cheap money, but I could pay cash for most properties. Then within two months of paying off the CCs, my score is back up above 700.

A landlord has two options when screening using a credit score/credit report. Either have no minimum credit score requirement or set a minimum and never go below it. If you choose the option of setting a minimum score requirement then analysing a credit report begins when a applicant meets that minimum requirement. You then use the report itself to choose the most qualified applicant or eliminate higher risk applicants based on their report details.

I use the second approach as it simplifies my screening by not wasting my time on higher risk applicants. The score is simply a statistical summery indicating a indivulaes probability of defaulting on money owed.

Since a landlord is usually the first in line to be defaulted on I base a great deal of importance on credit scores the same as financial institutions.  I operate strictly as a business, I am neither a social worker or a charity. Applicants are not people they are data and facts used to assess risk.

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