Can we ask about late/missed payments?

Question

Hello! My GF & I are first time landlords after purchasing our first triplex in LA. She owns her home we are currently in in Long beach as well. We are going to be moving into 1 unit of the triplex & renting out the other empty one, plus her long beach house. We have been talking applicants according to guidelines set from "The House Hacking Strategy" but I had a question about what we can ask in follow up questions to ensure we aren't doing anything wrong. An applicant meets our income requirements & our 600+ credit score but has a bunch of missed payments in the credit history, mostly on car payments. Can we ask for an explanation of this or is that overstepping our ability to inquire on things? Also, is this something we can reject the application over despite the other requirements being met? Thanks for any advice/insight/info, we are trying to make the best decisions but all of our current applicants have 1-2 question marks while meeting most requirements we have.

Mike McCarthy · Answer

@Cameron Mertens yes, you should ask! Credit score and income are not protected classes, so you can make decisions based on those things. As you probably expect, a few missed payments could be an innocuous error (bill got sent to my old address), to a disregard in paying bills off.

Good luck, sounds like you’re on the right track!

Frank Chin · Answer

I've been doing rentals for nearly 40 years, and always make it my business to chat with potential renters. Depending on how they handle it, it'll give you insight into their personality, finances, and a few times, out and out lies.

I would definitely ask about the missed car payments, but phrase it as a possible error and see what they say. The answer could range from "none of your business" to a big sob story, to "I was kinda busy so I missed a few". From this, you can gauge attitude which is important aspect of dealing with tenants.

We do a chat casual interview on the phone before showing, mark down what was said, and one time caught the applicant in a lie when we got a different answer to the same question when she showed up to see the place. At the time, we didn't pay extra for eviction reports, but did so after catching one applicant in a lie, and found she was previously evicted, and she answered "no" on the application on prior evictions. A second lie. Out of curiosity, checked her employment history and that was a lie to as the bank she claimed to work it was not at the address indicated. Now we always do an eviction check and employment check.

So, always ask questions.