What credit score, if any, do you require when screening tenants?

Rental Property Investor · Philadelphia, PA · Member since 2019 · 89 posts · 27 votes

Looking for some insight from the BP community. What specific credit score, if any, do you require when screening tenants? And are you no longer using a specific credit score in light of concerns with Fair Housing, Fair Credit and other laws? Your feedback is appreciated.

Thanks,

Aaron

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Austin Thompson

Property Manager · Atlanta, GA · Member since 2019 · 6 posts · 25 votes

Credit scores aren't really that great of an indicator of creditworthiness. Honestly, getting a history of their accounts/payments/etc gives you a much better view than just a score. We ask for 600, but a score below that isn't an automatic denial, we may just ask for some more documentation.

We run applications on a 4-point system:

- Credit over 600
- Criminal/Eviction Background Clear
- Homeownership/Positive Landlord Reference
- 2+ Years of Employment History

If they meet all 4, then great! They're approved on a 1-month deposit.

If they meet only 3 of them (let's say their score is below 600), then we'd ask for additional income documentation (like their previous year's tax paperwork to show their full yearly income). There's also a $200 Credit Approval Fee that covers the further research into their credit history and additional screening with added documentation.

If they meet only 2 of them (credit below 600 and a negative criminal background item, like writing a bad check) then we'd charge a 2-month deposit.

If they only meet 1, then they're denied.

Being able to run the applications in this manner really helps ensure that each application review is as far detached from personal feelings as possible. Makes it a very straightforward and fair process for anyone and everyone.

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Irina Belkofer
Real Estate Broker · Cleveland, OH · Member since 2017 · 719 posts · 658 votes
7y
Originally posted by @Anthony Rosa:
In cashflow markets you cant expect anything better than fair/good. If their credit score were very good/excellent then the prospective tenant would be a homeowner especially on a property that costs about the same as an above average vehicle.

That’s not true.
I have a tenant with FICO=705 and income $120K/year. She works from home in Pittsburg and Cleveland, renting in both cities.
Some people with decent score and plenty of income just not ready to settle down so they pay for their freedom to move if better opportunity will surface.
My property definitely not in A-B area: Rent is $900, purchase price $30K......so it’s real cash flow market.
Not everyone wants to own a property: many people, especially younger crowd, prefer to rent until they are ready to get family. Single people are renting - and my properties are cash flowing
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Federico Gutierrez
Realtor · Cleveland, OH · Member since 2015 · 2k+ posts · 857 votes
7y
show me bank statements and pay stubs to see you have money coming in.

Then I check to see how many lines of credit they have open. Don't care about the credit score
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John Teachout
Rental Property Investor · Concord, GA · Member since 2015 · 3k+ posts · 3k+ votes
7y
600 but we make exceptions with additional deposit. We also want to see why the score is what it is. Recent charge offs? recent collections? sorry, not qualified.
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Don Petrasek
Real Estate Agent · Westlake, OH · Member since 2014 · 186 posts · 165 votes
7y
Haven’t pulled a credit report on a tenant in at least 5 years (possibly longer, can’t remember when I stopped). 7 properties - no evictions (ever 10+ yrs experience), can’t remember when someone even paid more than 10 days late. I look at income + public record info. Have been using 4x rent lately. It seems like a lot, but when you do the math on a $950 rental, 3x doesn’t leave a whole lot behind for other expenses. And there are plenty of people who can meet that criteria....
No evictions ever is a hard and fast rule. My feeling is that if you let a situation go as far as another landlord having to file against you, I’m not comfortable that you aren’t going to do the same with me. Also no judgements >$2000 in last 3 years- worried about my tenant getting garnished.
I’ve found that my tenants pay rent first and if needed let other things go. It’s all about how you manage. If you’re loose with due date, they’ll pay the creditor that’s calling them everyday before they pay you.
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Costin I.
Rental Property Investor · Round Rock, TX · Member since 2016 · 1k+ posts · 971 votes
7y
@Aaron DiCaprio Excerpts from our rental criteria:
3 Reply
Anthony Rosa
Rental Property Investor · New York City · Member since 2019 · 703 posts · 538 votes
7y
Originally posted by @Irina Belkofer:
Originally posted by @Anthony Rosa:
In cashflow markets you cant expect anything better than fair/good. If their credit score were very good/excellent then the prospective tenant would be a homeowner especially on a property that costs about the same as an above average vehicle.

That’s not true.
I have a tenant with FICO=705 and income $120K/year. She works from home in Pittsburg and Cleveland, renting in both cities.
Some people with decent score and plenty of income just not ready to settle down so they pay for their freedom to move if better opportunity will surface.
My property definitely not in A-B area: Rent is $900, purchase price $30K......so it’s real cash flow market.
Not everyone wants to own a property: many people, especially younger crowd, prefer to rent until they are ready to get family. Single people are renting - and my properties are cash flowing
$30K prooerty renting for $900/month with a tenant making S120K/yr...Where?

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Andrey Y.
Specialist · Honolulu, HI · Member since 2014 · 1k+ posts · 1k+ votes
7y
Quite interesting folks mentioning that they charge 2 or 3 months deposit. Every state that I have been involved with only allows one month's rent security deposit by law.
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Aaron DiCaprio
OP
Rental Property Investor · Philadelphia, PA · Member since 2019 · 89 posts · 27 votes
7y
Again, appreciate all of the feedback. Very helpful and great guidance.
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