Tenant Credit - what is appropriate?

Question

What is the lowest credit score would you allow for a future tenant? If they had good payment history and good landlord references.

i.e. - Credit was dinged because of a divorce.

JD Martin · Answer

We don't really use credit scores except as just one piece of the puzzle. It's hard to have a disastrous (say low 500s or worse) credit score unless you have a whole lot of charge offs, missed payments, 60+ lates, etc. So if someone didn't have any of that stuff and everything else was good we would probably accept them.

Selecting a tenant is like baking a cake. There's a lot of ingredients that go into it.

Anthony Wick · Answer

We like to see a 600 score. Class B duplexes with rents ranging from $1,100 - $1,500. We have taken scores of 575 with copies of bank statements for last 3 months. We do not budge on income being 3 times rents, no felonies, no evictions (ever). We did decline the person that said they had a 400 credit score, and his girlfriend wanted to run a day care.

@Nathan G.. I'd like to hear about that 450 score you accepted.

Jonathan R McLaughlin · Answer

@Anthony Paul Guglielmi agree with @Nathan G. One issue with a low low score is that they are operating without margin. They probably have no credit cards and are vulnerable to shocks like having an expensive auto repair etc.

Things can spiral quickly out of their control, even with good will.

Sarah Brown · Answer

I have a 600 minimum, but have taken a few on a case by case, if there is an instance such as divorce causing a scoring issue.  However, they have to have great references, rental/mortgage history, etc.  It's definitely not just about the credit score.

Nathan Gesner · Answer

I use credit score. It's one of the best indicators of whether someone meets their financial obligations.

I've taken tenants with zero credit score, 450, 520, etc.

The background check doesn't tell you if someone will be a good renter or not. It identifies a level of risk. The lower the credit score, the higher the risk. Other factors may off-set that risk. For example, the low credit score may be due to medical collections due to a recent surgery but they're meeting every other financial obligation.

You have to know how to investigate every aspect of the renter to determine a whole-person level of risk. Then figure out how to mitigate that risk. You could deny them, which removes the risk, or you can accept them with a higher deposit which helps mitigate the risk.

Anthony Paul Guglielmi · Answer

@JD Martin I know that. I’m also looking at personal/business/landlord references, background check, my personal interactions with them.

Tenant Credit - what is appropriate?

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