Rental Property Investor · Pawtucket, RI · Member since 2018 · 38 posts · 12 votes
I am renting out a studio apartment, the majority of applicants don’t have credit at all. Would any of you landlords out there rent to people who don’t have credit at all? What else can I take into considerations beside credit scores? Any thoughts would greatly appreciated.
Investor · Marin County California · Member since 2018 · 1k+ posts · 2k+ votes
6y
Personally, I think FICO is a bunch of c*ap - a racket devised by banks to upcharge the unsophisticated. You can be worth 10 figures, have a massive stream of regular income and have a lousy credit score.
Look at current income, length of employment, personal references. Get a co-signer if you can. This will tell you what you really need to know.
Naperville, IL · Member since 2018 · 330 posts · 357 votes
6y
I agree it's mostly BS. Accepted a tenant today with a score of 666. She had like 3 late student loan payments in 2018, otherwise perfect. Basically her youth and lack of many cards works against her. We struggle to be above 740 ourselves and our payment record is 100%, but we buy a property or two each year and so credit score is being pulled more than they like to see. And we stupidly closed several cards 15 years ago, making our "length of time" issue worse. OTOH, my 28 year old had one 3-year term school loan he paid off early, and one credit card he pays off each month. His credit score is above 800, usually above 820, and he makes literally 12% of what my husband does. I look for income matching expenses reasonably. If you make $30K a year and drive a $60K car, I'll look for the next applicant even if so far you've always made your payments on time. Stuff like that seems to correlate better for us.
Personally, I think FICO is a bunch of c*ap - a racket devised by banks to upcharge the unsophisticated. You can be worth 10 figures, have a massive stream of regular income and have a lousy credit score.
Look at current income, length of employment, personal references. Get a co-signer if you can. This will tell you what you really need to know.
I could not disagree with this more from a LL perspective. The largest assurance you have that they pay their rent and not destroy the unit is the ability to ding their credit. Bad credit means nothing to ding.
What is their incentive under such conditions to pay rent when inconvenient? Their car needs service or pay rent, both not an option. I suspect the person with credit to ding will pay rent first and wait to fix the car. I suspect the one with bad credit may make a different decision.
Especially with no evictions policies, you want tenants that have something to ding. If the tenant falls behind in the rent and cannot be evicted, the primary incentive they have to pay the back rent is to save their credit.
In my markets (Class C to class A-), an eviction or bad credit virtually eliminates the tenant from virtually all class C and above units. The LL in the class C and above areas require credit checks (we also do a criminal check). not allowing tenants with poor credit is possible when vacancy rates usually are in the 3% range. Bad credit relegates tenants to class C- and below. Bad Credit or an eviction means they will not be renting any of our units.
I agree that no credit is better than bad credit, but good credit is better than no credit. I would want no credit to have a co-signer.
If this unit is class C or better, you should be able to find tenants with OK credit scores. Have to keep in mind that they are tenants. If they had 800+ credit scores they could likely purchase. I am not saying there are zero tenants with 800+ scores but 1) they are few 2) they may want class A properties.
The OP did not indicate what class property he was trying to rent. If the unit is in a class D area, he may find it difficult to get tenants that have decent or better credit (those tenants are typically renting in higher class areas). In areas with higher vacancy rates, maybe class C also may be difficult to find tenants with decent or better credit scores.
Property Manager · Gilbert, AZ · Member since 2009 · 1k+ posts · 451 votes
6y
Personally I don't even consider credit scores. I'm only concerned about rental history, criminal background and if there is ant past due debt or judgments. Credit scores are over rated and some people don't use credit at all.
Rental Property Investor · Providence, RI · Member since 2015 · 1k+ posts · 594 votes
6y
In that circumstance, I utilize a funnel-type application process. If you create an involved application where multiple steps are needed, you can evaluate their ability to see a multifaceted task through. If they jump through the hoops successfully, it is a good initial sign of their interest and dedication to unit.