Should I stop screening tenants' credit?

Question

I have several open units in lower-income areas. There is a good deal of interest in these units. I've passed out several applications and even collected application fees, but it seems that the email exchange process required by tenant screening services (like BP's) is too much for most of these potential tenants. I have been regularly collecting applications and fees, starting the screening process, and getting calls from potentials several weeks later asking about their application status. I tell them they need to follow the instructions in the email, and this is never done.

Frankly, it seems that this online process to pull credit is too much for most of the people I'm dealing with. A good percentage of them don't even have email addresses, especially the older ones.

Does anyone have any recommendations as to what should be done? Not screening tenants is anathema to me, but leaving units unrented for months is extraordinarily unprofitable.

Marian Smith · Answer

Tom Goans, you must be one heck of a poker player.

Kyle J. · Answer

Christian, you need to get setup to run the credit checks on your own so the tenants don't have to go online or do anything other than filling out the initial application they give to you. I run my own credit checks from the comfort of my house and it takes a matter of minutes to do it.

Andy Collins · Answer

I always tell every tenant I'm not looking for outstanding credit from their report, I just want to know that in general they pay their bills, that we all have issues in life.

Most of the time they will then open up and tell me exactly what I am going to find,,if its bad enough I save all of us the hassle and recommend not running the application (but if they still want me to of course I will).

I have had very few people just look me in the face and lie,,of course I said very few, I have had it done,,and sometimes they are really good at it,,which is why I run credit checks, background checks and rental history on everyone

Mike D. · Answer

Tom, I've seen you post this or something similar before.  So what systems do you set up exactly to ensure you get to make deposits? I'm sure you have not just been getting lucky for the last 50 years.

Patrick L. · Answer

On my low income rentals I don't check credit scores, because that doesn't matter to me.  I check criminal history and evictions.  If you pay your rent on time and not your credit card bill, that's fine with me.  Low income people generally have no credit anyway so it's a waste of money pulling credit reports.

Christian Carson · Answer

Thanks, everyone, for your input.

I asked some local landlords about background checking, and found a site called ZipReports.com that my realtor uses. Previously I was under the impression that a change in the credit reporting law essentially banned landlords from pulling credit reports in the "old" way (my bad - I listened to the wrong 'expert').

Tom Goans · Answer

I have been a landlord for almost 50 years. In all those years, I have never asked for or reviewed a credit report or conducted a background check. Neither have my father or my grandfather before him.

Bad things happen to good people. Employment can be an uncontrollable challenge. Divorce nearly always creates credit history problems.

Moreover, MOST people do not know how to interpret the information.

My best payers are people who have bad credit - or so they tell me. Their credit history is not a concern to me. Getting paid is.

I set up payment plans that fit budgets. I help my tenants and borrowers be successful. We all win. While many others are spending time screening, I am making deposits.

It is your decision on how to fit your business plan to meet the needs of your target market. You situation is unique to you and your target market.

Greg Potter · Answer

Christian Carson I agree with the other posters here, don't bother trying to get a low income person to go through some online process on their own, simply get their written permission to pull their credit and do so yourself.

Criminal and Eviction histories are far more useful in this market if you can access them.

Serge S. · Answer

I have a 32 unit complex all low income. I do not check credit. When I did it was a lock credit was awful and I lost potential tenants to the process. I am most interested in proof of steady income and rental history. Every tenant in this class will be a roll of the dice and you simply have to put a higher vacancy and turnover into your business model.

Michele Fischer · Answer

I am also in the low income market, and still check credit.  Our applicants rarely have a score at all – we almost always see “file not scored because subject does not have sufficient credit”. We expect applicants to have poor or no credit.  We run the credit report to verify addresses and to see what types of debts they have.  Addresses sometimes come back with odd date ranges or in odd sequential order; the dates are only captured when the applicant applies for credit.  We look for evidence of an address not disclosed due to not wanting us to talk to that landlord.  We also review the list, age, and amounts of unpaid debt.  Medical, auto, and rent to own debit are less problematic than utility companies or what could potentially be a landlord.  Agree that any credit screening option that requires the applicants to provide permission (and sometimes even pay the fee) via e-mail doesn’t work with low income populations.  .  They either don’t have e-mail or have too many technical difficulties to process the request.  We use aaacredit.net.  They require a one page questionnaire signed by the applicant, which we’ve incorporated into our application process.  For about $30 each, they return credit reports within hours.

Should I stop screening tenants' credit?

Most Popular Reply