Minimum FICO score for new tenants

Accountant · Tulsa, OK · Member since 2018 · 312 posts · 349 votes

So I recently had my only tenant give notice, and am about to start the search for a new one. Just wanted to poll BP for what minimum FICO scores you require for applicants, I know this can be area specific, the property in question is in what I'd consider a B area. Rents in the area for similar duplexes range from $1,200 - $1,400. I'm leaning toward a minimum of 680, but considering the time of the year I'm concerned this may limit my applicant pool too much. Let me know your thoughts, thanks!

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Ray Harrell

Investor · Chicago, IL · Member since 2016 · 1k+ posts · 930 votes

Score is not always indicative of ability or willingness to pay. A LOT of things can impact score for people who otherwise pay EVERY bill on time. It's a flawed system, even though it's widely used.

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Michael Noto
Real Estate Agent · Southington, CT · Member since 2008 · 5k+ posts · 3k+ votes
7y
@Kevin S. For a rental at that price point here in Connecticut we would want a minimum credit score of 650.
The biggest thing we have learned is that you do not want to make the minimum credit score to high where it becomes prohibitive in terms of people inquiring like you mentioned, but at the same point you do not want it lower than 650 if it is a rental above $1000/mo. There is a delicate balance there.
One thing you want to stress when screening is that the minimum qualifications you are looking for are just that. Minimums. If someone barely meets all of the minimums it does not necessarily mean automatic approval.
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Thomas S.
Member since 2016 · 13k+ posts · 12k+ votes
7y
B class properties, depending on area, should never be below 650.
In your situation the time of year is irrelevant. If your screening standards require 680, which is not out of line, you never lower those standards unless you are prepared to live with substandard tenants. The credit score is a strong indication of risk of default and as we all know the first creditor to not get paid is always the landlord. Those landlords that feel other factors in screening are more important generally do not understand the metrics of credit scores. C class property owners are generally dealing with applicants all having low scores and accept the risk but ant landlord with B or better that do not set a reasonably high credit score requirement have very little understanding of the value of scores. They generally justify their position by saying they want to see the actual payment history indicating they do not understand the score is a statistical risk summery of that history. They prefer to make excuses for their applicants to ignore the facts. Medical being a perfect example. Debt is debt, default history is not something to be ignored. Regardless of the temporary cause if they did it once they will do it again.
Stick to your business practices, stay with 680
I use 650 as a absolute cut off without exception but that majority of my tenants are in the high 7s.
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
7y
Originally posted by @Thomas S.:

B class properties, depending on area, should never be below 650.
In your situation the time of year is irrelevant. If your screening standards require 680, which is not out of line, you never lower those standards unless you are prepared to live with substandard tenants. The credit score is a strong indication of risk of default and as we all know the first creditor to not get paid is always the landlord. Those landlords that feel other factors in screening are more important generally do not understand the metrics of credit scores. C class property owners are generally dealing with applicants all having low scores and accept the risk but ant landlord with B or better that do not set a reasonably high credit score requirement have very little understanding of the value of scores. They generally justify their position by saying they want to see the actual payment history indicating they do not understand the score is a statistical risk summery of that history. They prefer to make excuses for their applicants to ignore the facts. Medical being a perfect example. Debt is debt, default history is not something to be ignored. Regardless of the temporary cause if they did it once they will do it again.
Stick to your business practices, stay with 680
I use 650 as a absolute cut off without exception but that majority of my tenants are in the high 7s.
does Canada have the same scoring system as the US.. I know they say Canada is the 52 state.. :) but i would think credit is scored differently in a different country.
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Kevin S.
OP
Accountant · Tulsa, OK · Member since 2018 · 312 posts · 349 votes
7y
@Michael Noto and @Thomas S. thank you both for the advice, I'm going to stick to my guns with 680.
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Dan Maciejewski
Realtor · PInellas County Largo, FL · Member since 2016 · 902 posts · 810 votes
7y
Always keep in mind that with a credit score of 680 and the cash to move into a $1400/month rental, most people are in a position to buy a house! Some lenders are looking at 580 as a bottom!
I wouldn't go too much lower if you don't have to, though. See what the applicant pool looks like at 680.
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Robert Biggerstaff
Contractor · Pensacola, FL · Member since 2018 · 303 posts · 240 votes
7y
The other thing to consider is is that if they have a lower credit score possibly get a double deposit from them
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Al Pat
Rental Property Investor · Atlanta, GA · Member since 2016 · 325 posts · 253 votes
7y
I screen and accept tenants with 650 or above with monthly income of 3X the rent Gross or 2.5X net. No eviction on the record.
3 Reply
Ray Harrell
Investor · Chicago, IL · Member since 2016 · 1k+ posts · 930 votes
7y
Score is not always indicative of ability or willingness to pay. A LOT of things can impact score for people who otherwise pay EVERY bill on time. It's a flawed system, even though it's widely used.
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Katie Stewart
Specialist · Fort Collins, CO · Member since 2018 · 557 posts · 191 votes
7y
If you aren't able to fill your vacancy in a reasonable amount of time, I would consider lowering your credit score requirement to 650. Nothing below that for a B property though!
1 Reply
Jonroy Connell
Rental Property Investor · Georgetown, MA · Member since 2015 · 40 posts · 6 votes
7y
What would you consider the bottom for A class neighborhoods?
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Nathan GesnerBusiness Member
Moderator
Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
7y
It depends on what your market can support. For a B-class SFH I may require above 650. For a C-class apartment I'll go down to 600.
As someone else pointed out, the credit score indicates risk but there are ways to mitigate risk like a higher deposit, last month's rent, etc.
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Thomas S.
Member since 2016 · 13k+ posts · 12k+ votes
7y
Jay....genearlly the same credit score system as the US.
I believe on average American scores are a little higher on average. 704 compared to our 650. This may be due to th eslight differance in the American score system only going to 850 where as ours gous up to 900.
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Sam Shueh
Real Estate Agent · Cupertino, CA · Member since 2016 · 4k+ posts · 1k+ votes
7y
You are not granting mortgage approval. You focus on their rental history and income.

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Thomas S.
Member since 2016 · 13k+ posts · 12k+ votes
7y
"You are not granting mortgage approval"
Making mortgage payments is not much different from making rent payments. Credit score is a rating system to gauge the risk of default. Default on rent, default on mortgage. Risk is risk, smart landlord want to know.
Granted if you are renting to C/D tenants screening is no better than flipping a coin.
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Brian Ploszay
Investor · Chicago, IL · Member since 2009 · 1k+ posts · 1k+ votes
7y
I'd lower it a tad. But what is important is the algorithm you should create for accepting a tenant. For example, a tenant with medical payment delinquencies may be understandable. A tenant with unpaid utility bills on the record is a red flag. A tenant with an eviction on the record is automatically rejected.
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Irina Belkofer
Real Estate Broker · Cleveland, OH · Member since 2017 · 719 posts · 658 votes
7y
I'd consider income is much more important than credit score. Even at B class (Rent $1400-1600) income and background checks rule.
I require 4 rents income with low FICO, and only 3 - with decent score.
Eviction is much more sensitive subject than credit, even if it happen 5-7 years ago. Then I will require first and last month Rent plus security deposit.....given that I even consider such tenants.
High credit score means these tenants will be gone as soon as they find a house to buy. Why do I need transition Tenants? I want them to live for decades - until they fix their credit to get preapproved for the mortgage
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Justin Murray
Tacoma, WA · Member since 2018 · 24 posts · 21 votes
7y
@Thomas S. I do disagree. I accepted some tenants with bad credit but exemplary previous landlord references. 3 landlords over 10 years had nothing but glowing things to say about them. Exactly as you predicted, they had a medical issue that tanked their credit. They were upfront about it with me before even applying for the house. When the husband had surgery they decided they would still always pay their rent because having a home was the most important expense (plus a surgery can't be repossessed or evicted). Potential tenants with bad credit and evictions or late rent payments I'll pass on. But bad credit with great landlord references I'll take all day.
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Neal Ward
Rental Property Investor · Atlanta, GA · Member since 2017 · 26 posts · 7 votes
7y
NEVER accept tenants with BAD CREDIT!!!! Only 600+
1 Reply
Adam Johnson
Rental Property Investor · Clarksville, TN · Member since 2017 · 8 posts · 3 votes
7y
@Robert Biggerstaff that's exactly what we do. Clearly the higher the credit score criteria, the less of a pool to pull from. We charge a double deposit up front for credit score below 600.
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Roni BanerjeePro Member
New to Real Estate · Wappingers Falls, NY · Member since 2013 · 4 posts · 1 vote
7y
@Kevin S. I had a tenant with score less than 600 - had some extenuating circumstances - they explained the situation - I looked at employment history, rental history, called previous landlord and their references - best tenants I got. If you are in a good rental market by all means add a pre-condition to the application - if not I would keep the flood gates open and then evaluate the top few and go from there. All the best!
1 Reply
Mark Fries
Contractor · Jacksonville, FL · Member since 2017 · 1k+ posts · 2k+ votes
7y
@Ray Harrell I agree...I do not even look at credit scores.
1 Reply
Caleb Heimsoth
Rental Property Investor · Durham, NC · Member since 2016 · 7k+ posts · 7k+ votes
7y
@Kevin S. Credit scores really vary on the area and type of rental. I will go as low as the low 500s if they have no evictions, felonies etc and make 3X rent. Some places don’t even check credit since the rent is so low. It just varies a lot.
1 Reply
Eric Gaines
Rental Property Investor · Raeford, NC · Member since 2017 · 12 posts · 4 votes
7y
@Kevin S. Hey Kevin, Great question but from what I have gathered it depends on the area and type of tenant you are trying to attract. I set my minimum credit score qualification at 550 and above. You have to take in several factors when identifying if a tenant meets qualifications for renting the property. These qualifications could be what the debt is that is impacting their score, do they make three times the rent in income, have they defaulted on any loans and what is their total debt monthly payment compared to the income they are generating monthly. For example, One of my tenants went through a bad divorce in which she had everything in her name. Once the divorce was final the other spouse stop paying the bills subsequently causing my tenant score to drop.
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William W.
Rental Property Investor · south Alabama · Member since 2018 · 121 posts · 88 votes
7y
I’m curious, for those of you who use SmartMove, what is the lowest ‘resident score’ you accept?
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Ricky Powell
Investor · Tulsa, OK · Member since 2017 · 24 posts · 7 votes
7y
Kevin I manage around 30 SFR's and 1 duplex in Tulsa. Feel free to give me a call to discuss specifics. I personally don't have a minimum credit score requirement however utilize credit to assist me in determining if a tenant has sufficient income after installments which are reflected in the credit report. I also look at the credit report as a gauge of the tenants current trends. We don't accept applicants who have negative history in the past 2 years. If a tenant has a low score due to bad decisions older than 2 years but over the previous 2 years has no negative history than we view that as a financially responsible trend and would approve that 1 criterion. If the there has been recent negative history a trend in the opposite direction would be indicated and a denial would be issued. This metric doesn't seem to effect our ability to lease property. You can message me directly or give me a call to discuss further if you would like!
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