Potential tenant has bad credit and a DWI

57 Replies

I recently met a potential tenant that I fell in love with. Very sweet personality and she was excited about the uniqueness of the property. 

I checked her credit score and it was not great (595), has a history of some late credit card bills, and has a DWI. She said she's been living with her parents so I wonder if she just had a rough spot and moved past it. She also has $30k in student loans.

Is it a terrible idea to let her rent, even if I have a cosigner? Or should I move on to the next one? 

Whatever your criteria’s are, stick with it and follow them religiously. 

Co-signers are typically a bad idea and I’m not a big fan of them.

I don’t suggest you fall in love with tenants, just fall in love with your business model.

This young gal wouldn’t meet my criteria.

#DUXOV

Well.... if you liked her you can ask for a bigger deposit, or get a co signer etc. 

How long ago were the issues? How hard is it to rent your unit?  Does she have a job? If yes, for how long? What does her prior LL say? 

I have taken chances. Mostly they paid off. Once i lost a weeks rent. But i helped out some folks that truly needed it so i was ok with it. 

Originally posted by @Jennifer Jackson :

I recently met a potential tenant that I fell in love with. Very sweet personality and she was excited about the uniqueness of the property. 

I checked her credit score and it was not great (595), has a history of some late credit card bills, and has a DWI. She said she's been living with her parents so I wonder if she just had a rough spot and moved past it. She also has $30k in student loans.

Is it a terrible idea to let her rent, even if I have a cosigner? Or should I move on to the next one? 

 DWI's are not by accident. It is simply bad judgement on their part. The stats are that someone drives drunk 5 or 6 times before they are charged with a DWI. If your little girl was killed by a DWI would you rent to them? They will exercise the same judgement on your property and economy. They come first in their lives. I was hit hit by a DWI who ran a red light. I am no longer tolerant of DWI's. 

All I see is red flags, the issues you listed and her needing a co-signer at time of application is a good indicator that she isn’t at the point of having her issues behind her. Everyone makes mistakes, hopefully she has gotten her life turned around and is making better choices. As much as I would love being instrumentental in turning someone’s life around, it’s not in your best business interest to take this type of risk. Think about the reason you wanted to become an investor, was it to help seemingly good people who made poor choices in the past, building wealth/cash flow, or some other reason?

From my experience, people are usually nice and kind when you first meet them, however, after time you get to see their true personality and character. Even with a co-signer it can still be a major headache to get your money if the tenant decides to not pay. I would pass on this one..

@Jennifer Jackson The 595 and Dwi wouldn’t necessarily scare me. When did all this happen? This year? 6 years ago? And of course if somebody walked in with 750 credit score and a $100k salary you move on from her. But what are your other options? What’s her salary? Savings? Co-signor is a good idea too. My criteria is a 600 credit score. I just rented to somebody with 590. Why did she have a 590? A divorce 10 months ago. All other things looked great. Job. Income. No felonies or evictions. And a nIce savings account from sale of her house. Not everything is cut and dried when it comes to tenants.

Ive denied three applicants already, with credit scores closer to 650. I look for consistency of payments in the past year, and verified w2 income that matches 3x the rent. I also look for previous evictions, and bankruptcies. 

I look for recent patterns more than anything (past year). The score itself doesn't concern me as much. Anyone can have a good job, but not everyone is good with money.

Originally posted by @Anthony Wick :
@Jennifer Jackson The 595 and Dwi wouldn’t necessarily scare me. When did all this happen? This year? 6 years ago? And of course if somebody walked in with 750 credit score and a $100k salary you move on from her. But what are your other options? What’s her salary? Savings? Co-signor is a good idea too. My criteria is a 600 credit score. I just rented to somebody with 590. Why did she have a 590? A divorce 10 months ago. All other things looked great. Job. Income. No felonies or evictions. And a nIce savings account from sale of her house. Not everything is cut and dried when it comes to tenants.

 Your Comment: "I just rented to somebody with 590." Let us know in 6 months if that was still a good idea.

I do things a little bit differently. I don't care if they have a bankruptcy. They can't file again for a few years. I don't care if they have a foreclosure. I don't care if they have a bad credit score. But then, I'm getting $25,000 down on a Lease Option to a Tenant Buyer. It sure beats having a first month's and deposit and worrying about vacancies and unpaid rent. 

I do care if they have child support and aren't paying that. That tells me what kind of person they are. Other than that, I'm pretty flexible. Since I get the $25k I wind up only with people who are serious and can afford it. And it gives me enough to go and get another property.

DWI I wouldnt care about, but bad credit I would. I usually want above 600, but Ive gone into the 590s before. I usually ask for a higher deposit when I do.

@Mike M.  

I'll make sure to let you know if I made a mistake between a 590 credit score and a 600 credit score. For 10 points, I considered her past payment history to her current landlord, her income, and her money in a money market savings account. 

@Jennifer Jackson  

I think it depends on the demand of your rental (unit type, neighborhood etc.). If it is high in demand, I would look into other "higher quality" tenant prospects to rent to. Other than that I would look at the situation as black and white as possible and stick to your guidelines. You can definitely employ some additional safeguards (higher deposits, guarantors/co-signers) but at the end of the day it is a risk that you will have to take knowing that her financial history isn't polished. The key is mitigating surprises or risk of loss on your end as much as possible.  

@Jennifer Jackson The two exceptions I never make are No Evictions and lower than 3x income. We are most flexible with credit although recent lates are a red flag. If it were me if she has more than enough ability to pay above that 3x monthly income threshold and you can do a higher deposit and or first/last months rent depending where you are at I would definitely consider. Some of my best renters have had bad credit although most are due to medical bills or a divorce.

Thanks for the replies everyone! We've decided to up her security deposit and ask for proof of income 3x rent. 

@Jennifer Jackson , I wholeheartedly agree with your decision to increase the security deposit and verify income is at least 3 times the rent. To qualify "higher risk " tenants, we would ask for a double deposit, income needed to be 3-4 times the gross rent and the tenant had to show a verifiable good rental history for the past 4 years. Doing a month to month agreement rather than a lease provides you further protection, in case things go south and you have to get the tenant out quickly.

Good luck!

@Jennifer Jackson the minimum credit score for an FHA loan is something like 580. Most landlords apply 600 as minimum but some are higher or lower depending on class of the property.

I would be concerned that she is living with her parents, because she is probably not used to paying rent. It may also be difficult to get rental references. For that reason, I would pass. I am not a fan of cosigners, but that could be an option.

I don't think the DWI is relevant. Plenty of responsible people get DWI. All it takes is one unexpected checkpoint after having a couple drinks. 

I had a neighbor that sounds just like her.   recently got her first DUI, and was evicted from the apartments where I lived.  

nicest person during the day, train wreck at night, drinking every single night and getting into fights with folk at bars. 

#skip 

All I will be concerned is whether she has the ability to pay her rent and her rental history.


I Had a female applicant who just loved the house , said she lived at home with parents after a divorce really wanted the place , paid me all type of compliments .    Then i got the credit report  .... 550 and she had 8 FTPR in the courts ( failure to pay rent)  she neglected to list those past adresses 

DECLINED

If she doesn't have the first months rent and deposit right now then all bets are off.  I can't believe the number of applicants that I've had that we're living rent free and expect me to wait on the rent and deposit.  I don't care how much you love her, if she hasn't been saving money while living at home find another tenant.  

Really bad credit is a very strong indicator of whether the tenant will reliably pay the rent on time. When I started out, I made the mistake a couple of times of thinking that the credit score was due to "bad luck." The only exception is occasionally a person will have a bad credit score from a prior spouse whom they have divorced. 

Almost always, responsible people have good credit scores. Irresponsible people have low credit scores. 

I strongly suggest that you ignore any feeling about how nice they seem. I've done that too and lived to regret it. Please believe me, you will be dealing with a completely different person when they owe you rent. 

In principle, I wouldn't go for her. My minimum requirement for credit score is 650.

Now, if you don't have other prospects and really liked her, I would just have a conversation with her. It has proved useful to me recently to make a final decision. I would say: "I see some late payments..." and "I see a DWI..." Then you can go from there.

I would not rent to her without a conversation that made me feel better. You don't want to find yourself in six months saying: "I knew it, I knew I shouldn't have done it." You need peace of mind.

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@Jennifer Jackson The DWI doesn’t bother me as much as the low credit score. There’s many tenants out there, so be picky, it’s a business and you are there to make money so don’t get attached to any one tenant. If you want to give her a chance it’s up to you, but don’t be surprised if it doesn’t work out. Good luck!

 She came off sweet during the meeting, but her background provides more evidence of what she is really like, irresponsible. If she has a DWI on her record it likely means that she has struggled with drugs and alcohol for months or years before getting caught. Without a solid rental history this likely wont turn out well. It sounds like you two got along great! This could actually be a problem in the future because she may view you as a friend instead of a landlord. I could already see her asking for extra time to pay rent. Next.

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