Tenant with no credit history...What would you guys do?

Question

Hey BP pros!  We have a very nice couple that would like to rent our home. When we met them, I got a great vibe from them and would really like to rent to them.  They have contacted us to say they are really excited and that we could even go look at the house they are currently renting just to assure us they will take good care of the house.  Only one of the applicants have applied so far.  This person had absolutely nothing on their credit history, which made the score show up as very poor.  There was nothing bad on the background, eviction or criminal check.  I just find it odd for a person in their late 20's to not have one thing on a credit report.  Also, when they came to look at the house, they mentioned that they had a property manager for a home they had in another state.  And, they came to the house in a very nice, new Cadillac SUV.  Does this sound odd to anyone else?  Don't you think there would be a mortgage or car payment.  Could Transunion be wrong?  Should I call the applicant and ask questions?  Is that legal?  What can I or should I ask?  Thanks for any tips you might have for us!

Jon Klaus · Answer

More important than credit score is; 1) Rental history, and 2) Income/jobs.  If those are good and all else checks, out I would rent to them.

Robert Steele · Answer

I always ask for bank statements. I even ask for tax returns if they are self-employed. Just make sure to have them sign IRS form 4506T "request for tax return transcript" to discourage them from making up a tax return.

As Jon said, rental history and income are paramount.

Richard Rogers · Answer

I lot my job and went through a bankruptcy in 2005, lost my house, etc.  I found a house for rent, wound up being an investor, it was brand new, 1 week old.  I talked to the management company, told them my story, the truth, etc.  They talked to the owner and agreed to rent to me.  I lived in it for 3 years, never late on rent one time, kept it very clean.  At the 3 year mark, they offered to sell it to me, but I didn't have the credit, so I had to move.

I've heard a lot of stories about renters, and some personal ones from family members that had renters.  But there are also a ton of great renters out there.

Take the time to talk to the people, ask their old landlord, talk to their old neighbors, etc.  You never know, you may wind up with some great renters for years to come.

Richard

Beth D. · Answer

I agree with Jon and Deborah.

And just so you know, coming from one of those "weird" people with no credit score (not just a low score - none at all)... it would not offend me if I was trying to rent and the landlord asked for bank statements to verify things :) my husband and I rented 2 or 3 different houses before we bought ours without any scores - they just looked at income and history.

Deborah Burian · Answer

Ditto what Jon Klaus said plus on the rare occasions when a tenant has balked at a credit check, I just tell them, "We're giving you control of a $70,000.00 property, of course we're going to check your credit.

This is with, of course, a full application and consent.

Matt Devincenzo · Answer

Don't feel uncomfortable about it. Do you feel uncomfortable when the bank asks you to fill out a CC application?

Also most people that are quality tenants have no problem with you looking into their background. The people who feel like you're being snoopy are the ones that don't want you to find something usually(not always but often) the ones with nothing to hide understand that you're just protecting your interests in the property.

Don't over explain things, say you still need the 2nd person's app filled out and that because they have no credit history showing that you have to verify their ability to pay with bank statements and past LL info.

Don't apologize or explain because now it seems like it's something that you feel wrong about(why else would you apologize), if you just state what you need and why you do I bet they don't even give it a second thought and provide the info requested.

Dion DePaoli · Answer

It costs money to report to credit agencies.  If the previous landlord was private like yourself, they likely do not pay to report to credit agencies.

Also, not all creditors report to all three bureaus nor does every creditor report every month.  It is not clear if you pulled all three bureaus or just one.  If only one that might be the problem.  If there is an auto loan, it might only be on one or the other two bureaus.  It could also be the auto loan is through some local auto car sales lot with in house financing and they simply do not report.

You can certainly speak to them, and I would, about all of this.  Nothing illegal about that.  You can then ask to use some alternatives such as canceled checks for 12 months for their active credit.  Get the name and number to their previous property manager or landlord and call them and see how good of a tenant they were.

I will footnote this with, the applicant should have signed a form allowing for you to run a credit check before you pulled credit.

Matt Devincenzo · Answer

It is odd for Americans today but not if they are one of the few that are good with their money and have chosen to live an all cash lifestyle.

The other more likely option is that they have everything under the other person's name which is fine as long as they have a good payment history..

At 25 I have good credit, but I could easily have been similar to them in that I've never had a vehicle loan and until a year ago no mortgage because my house was bought cash so it is completely possible.

I personally could care less what the credit score is I only care about what their payment history and income to rent ratio looks like.

My advice pending the 2nd applicants approval is talk to 2 LL back(not the current since he could have a reason to want them gone), and ask to see bank statements. That will give you an idea of how they spend their money so you can see if they are constantly buying stuff or have healthy spending habits(yes you can legally ask for bank statements).

If they ask why just explain that you are essentially extending credit to them in that they are receiving a benefit in exchange for a payment just like a bank would do on a loan so you are protecting that interest by qualifying their "borrowing ability".  Good Luck

Timothy W. · Answer

Income verification means they have income as of the date of application.  Tenant history means they've been a good tenant the last couple of years.  They are both good things.  Credit history is the sum of over a half decade of work.  People (tenants and cosigners) with good credit will do whatever it takes to protect their credit.  Your lease is the short game.  They think long game.  They won't let short game ruin their long game.

Account Closed · Answer

Why not just ask for a larger deposit?  You said you got "good vibes".  That is the most important thing.

Tenant with no credit history...What would you guys do?

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