New to Real Estate · Ooltewah, TN · Member since 2017 · 32 posts · 4 votes
I have an applicant who has a credit score of 650, $97,000+ in debt ($53,000+ in credit card debt, and $42,000+ in auto loan debt), but has not been late on a payment in 4 years according to his credit report.
He claims he is working on paying his debt down. My question for experienced landlords, do you typically take a chance on someone with a low credit score if they appear to pay on time, and monthly debt to income is reasonable?
Real Estate Investor · Burlington, VT · Member since 2010 · 2k+ posts · 1k+ votes
6y
@Robert Smith I would have concerns on that. $53k is a ton of credit card debt and no one really should have more than $15k for an auto loan (IMO). No late payments can simply means the applicant is pulling money off the cards to make other payments, which will run out as soon as the credit limits are reached. Or the CC's could lower the limits as lending becomes more restrictive.
@Robert Smith I would have concerns on that. $53k is a ton of credit card debt and no one really should have more than $15k for an auto loan (IMO). No late payments can simply means the applicant is pulling money off the cards to make other payments, which will run out as soon as the credit limits are reached. Or the CC's could lower the limits as lending becomes more restrictive.
That was my first concern. He mentioned that the debt was accumulated from his first marriage, and that he has funds in his 401k and savings. What would be a legal way to confirm this information? Example, ask for bank statements, and credit card statements for each card for the last 2-3 months?
Real Estate Investor · Burlington, VT · Member since 2010 · 2k+ posts · 1k+ votes
6y
@Robert Smith Yes, you can certainly ask for statements. But unless you have no other applicants, I would consider to keep looking.
I typically use a 660 min score for mine, and if it's not there, I reject it and attach a letter stating the credit score was less than my requirements.