Minimum credit score for a potential tenant?

Question

Hi everyone, just closed on my first property and now we are up to screening tenants. I have two sisters interested  with a 545 credit score and a 485 credit score. Otherwise no red flags.

Can anyone help with some advise?

Cassi Justiz · Answer

Generally I like 600 and above. BUT I don't really base anything off the number score alone. I agree with @Jacob Sampson in that I try to understand the cause of the bad score. Are they consistently not paying bills, or was it a one time life scenario and they are getting back on track? I've also seen people working the Dave Ramsey method that have terrible credit because they are closing accounts once they are getting paid off.

For the income, I won't accept anything under income of 3x rent. If someone is spending over 1/3rd of their salary on rent alone, it will be hard to maintain that should anything happen to that salary.

Jacob Sampson · Answer

I try to understand the cause of the bad credit.  If there were a bunch of DR bills that killed it or a divorce that is different than a low score because they consistently can't pay their bills.

Cassi Justiz · Answer

Account Closed I would definitely pass on this application. Collectively they are not even making 3x the rent AND they both have bad credit scores. When renting to roommates (sisters still count as roommates in my book), I want them to individually qualify. On the income piece, I wouldn't require that they separately make at least 3x rent, but it needs to be close to that. If one roommate moves out unexpectedly or looses a job, either one of them needs to be able to handle the rent amount for some period of time.

Tom S. · Answer

Account Closed  Agree with Jacob above, I try to analyze it a bit too (although medical bills no longer affect credit score - FYI).

Typically I shoot for 640 min, and I have a few exceptions for college students for one of my properties.  The students and parents are all Canadian.  I increase the security deposit a bit for that property, and have had no issues with 10 years of renting it to various students.

Regarding your two possible tenants, why are their scores so low?

- Tom

Michael Craig · Answer

Account Closed

Depends on your market and tenant class. I am in a class B market. I look for a minimum of a 625 credit score and if the tenant cannot meet this I require a cosigner who meets this requirement. I provide a list of criteria before each tenant files an application.

Account Closed · Answer

Thanx Michael. This is a c market so would you say this is good to work with? Also what ratio am I looking for as far as monthly income to rent?

Linda Trettin · Answer

I’ve been a landlord 30 years.  I’ve only had two evictions, both to people that I’ve accepted with less than 600 credit scores.  I lease low priced condos, but demand a 680+ score and I get it.  I keep the units in top notch condition, but price them $50-$100 less than market.  It’s worth it because I have no issues.  Low income people can have good credit & they appreciate a well priced, maintained property.

Jason Cummins · Answer

I would wait.  Thats not even 3x the rent.

Minimum credit score for a potential tenant?

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