We just bought a 3-family and have one unit left to rent out (owner occupied). We have an applicant who we generally liked, a nice woman with a disabled daughter who is in boarding school 9 months out of the year. The problem is that she says she has bad credit due to a divorce (457). She has many late payments on her current car. Other accounts have some late payments but mostly current.
We hadn't rejected her yet and she came to us saying her religious organization is going to be the leasee, effectively her guarantor and will be paying us directly. How do we go about looking into this and making sure we get paid from the organization? Are there background/credit/income checks for organizations; specifically religious ones? We have other applicants (none yet with stellar credit) but this seems like it might be a good way to go.
Also please feel free to refer me to any prior posts about this, thank you!
@Rebecca Rogers I'd start by calling them up and talking to whoever is in charge of the groups finances. Make sure they are creditworthy. There are tens of thousands of religious organizations in the US. Yes, tens of thousands!
Personally I wouldn’t bother, too many red flags. Even if it’s true Charities or Religious Organizations can run out of funds if mismanage. If she can’t quality by her own I would move on
HI @Rebecca Rogers . Early in my banking career, the institution I was working for did a study of all loans and their default rates based on the job code that was entered at the time of the application. The best paying job code was a Registered Nurse. The worst...and it wasn't even close...clergy. I know it might be hard to believe, but religious organizations and pastors statistically pay their bills worse than any other loan profile. When I started my career, I was shocked when I read the report, but more seasoned lenders at the time simply pointed out that it was well-known in the industry that, although there are many true "men/women of God" that are honorable people, a huge portion of them bilk their flocks. Church loans scare the bejezus out of banks and for good reason. Some will pay their bills, but statistically religious organizations pay worse then other industries. Simply some food for thought.
A 457 credit score is unacceptable. You are running a business, not a charity. Keep searching for a better qualified applicant.
1. Nobody's credit drops to 457 just because of a divorce. I got a divorce many moons ago and my credit hardly dropped at all. Her score probably started at 462 and then dropped to 457! Seriously, she's got bad credit due to a long history or bad choices, not just divorce. Let's also remember that just because someone is divorced doesn't mean they are a victim. Maybe she's divorced because she tried to kill her husband or slept with half his coworkers.
2. Churches are not very good at screening people. They have soft hearts and little or no experience. They give money to people with their hands out because they truly want to help but it's just as likely to enable the individual. I have churches call me every month asking about whether they should help a tenant with rent. I estimate about 90% of the people they help end up back in the hole and evicted shortly thereafter. He who is faithful with little...
To put things in perspective, I knew someone a few years ago, with garnishments from defaulted student loans.. Her credit score was still about 500.
Then there was a family member who I helped buy a car years ago (maybe 2003).. She had collections galore - defaulted utility bills, a repo, a closed checking account with a negative $1000 balance, etc. on her credit. Her credit score was somehow still in the mid-high 5's (maybe because the bad stuff was all a couple years old by then).
To get your credit score down to the 450s is actually kind of impressive.. It's a lot of work to screw up that bad. I'd be worried that this person is a professional deadbeat with a score like that.
@Rebecca Rogers It would likely not be wise to rent to this tenant. I have first hand experience in a similar situation.
I worked with a local charity for the homeless and that tenant ended up being one of the worst we have ever had. She drove all our other tenants away and trashed an entire apartment in one years time. Charity was very mismanaged and didn’t compensate us for anything.
First let me say ;I believe in second chances and some people really do need some love poured on them in difficult times . I’ve been part of many charities through my church . I’d love to report that the majority of folks who got a helping hand from the church rose from the ashes so to speak and greatly improved their situation becoming independent but alas I cannot say that . When I helped at our church community food pantry the same sympathy cases would come like clockwork to get the free groceries every time .in fact it got so bad we had to limit a “one chicken per week” policy because they kept coming to get more meat through the week . being financially illiterate is a disease of the mind . It’s much better to teach a man to fish than hand him a fish. Most churches are going to offer a one time help with rent or food but they won’t subside the rents long term atleast not what I’ve seen around here with Baptist and Methodist churches I have attended . I’ve been on church boards. And Usually If it festers too long The elders will meet and see if this Needy person Is truly trying in life to improve their situation and if not the money will be cut off . It’s the way our government should be ran . Having a church as a co signer would not be enough for me to take on a high risk tenant .sadly Ive seen it a million times . A family shows up on Sunday’s for a month straight and becomes friendly with the congregation, they show a contrite spirit and may even go up and openly repent of their misdeeds in public , being the loving people we are ,we accept them into the fold as brothers and sisters but the reality is they will soon fall away and were never one of us so to speak . Most churches I’ve been around have a hard time with tough love due to soft hearts for the poor but sadly there’s a good reason those folks are poor . They’ve got money for cigarettes beer and dog food before they pay their obligations
This scripture says it all :
“For even when we were with you, this we commanded you: that if any would not work, neither should he eat.”
If I could vote for @Dennis M. post 1000 times I would. Most of the calls our Church receives are folks looking for a hand out.
Dennis you need to come to San Antonio and be part of our leadership team:)