Question on credit requirements for tenants

8 Replies

Hey guys,

I'm going through my very first applications.  We set our credit score standard to 600 and above.  In a case of husband and wife for example, do you require them both to have a score of 600 and above?  Or is one of them enough?  We would require them both to fill out the application of course.

Thanks for the help!

@Damien L.

Personally, I would require for both parties to have a 600 score and above. Couples go through fights, separations or divorce. Eventually it may lead to one party leaving and the other staying. You want it to be where if either of them leave, you know they are financially responsible to carry on the rent without any issues.

I have a husband and wife who both have lower 600 credit score. They both work but the wife's income alone pays for the rent. I know if the husband ever leaves, at least the wife will be able to hold down the rent.

I also take credit into account when screening tenants, however, a high score does not always guarantee a high quality tenant.

I suggest creating a scoring system and using that for EVERY applicant. A strong scoring system that you use consistently can help you stay out of trouble if someone accuses you of discrimination.  

Example: credit over 700 = 5 points, 600+=3 pts under 600/no credit= 0 pts

Good landlord reference= 2 pts, bad landlord reference= -1 pts, no landlord reference=0 points and so on with income, personal references, etc...

If the tenant scores a 10+ they automatically are approved.

You should definitely require both parties to meet the 600 or above score minimum. We would constantly see situations like those described by Brian at the apartment complex where I worked. Both tenants were required to sign the lease so that in the case that one person decided to move out, the other was still responsible for the full rent payment. This ensured that we had the proper legal documentation if there were legal ramifications. 

So both parties or all tenants that should have a score of 600 and above.  And they also both need to have the 3x the rent income requirement?  I feel for couples or roommates that could narrow the pool of people significantly no?

Thanks

Originally posted by @Damien L. :

So both parties or all tenants that should have a score of 600 and above.  And they also both need to have the 3x the rent income requirement?  I feel for couples or roommates that could narrow the pool of people significantly no?

Thanks

Total of both renters 3x monthly rent income per month 

Why would you require a credit score, are you loaning them money? You definitely need to look at credit history but a lot of people have bad credit scores that really don't affect their ability to pay rent. For example a cancer survivor with bad insurance coverage will have a ton of debt and it's probably all past due... because they have to pay rent first. And secondly, there are some people who don't use credit at all and they won't even have a score.

I'm with @Dick Rosen and look at the whole person. My application score sheet has ten different criteria and each one is scored 0 - 3 points. I add those points up and get a total score which determines if they are approved and how much deposit they pay. I have great tenants with 550 credit scores and I have pretty crappy tenants with 650 scores.

When you set a standard, you should truly understand the reason behind it. Don't just require 600 because your buddy Johnny told you to or you read it somewhere on BP. WHY do you set that limit? Is there ever an exception?

Every policy has an exception, especially if you understand the "why" behind it.