Good Rental History But Poor Credit History

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Good Rental History But Poor Credit History

Wale LawalBusiness Member
Real Estate Broker · Houston | Dallas | Austin, TX · Member since 2018 · 5k+ posts · 2k+ votes

Hey Guys,

I am currently screening few tenant application for one of my rentals, One of the my potential tenants have great rent payment history but poor credit score with few collections in his record. No criminal background.

He has his own electric company so he his self-employed with 6-figure annual income. I just don't understand why he would allow payments to go to collections. His wife is Veteran and a Joint Applicant with about $3,000 monthly income.

Monthly Rent is $1,500

TransUnion SmartMove recommend that I "DECLINE" this applicant.

BTW, I care more about consistent rent payment.

Please I need you to share your experience on this type of tenant.

Looking forward to a real-life experience on this.

Thank you 

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Dave SpoonerPro Member
Rental Property Investor · Cincinnati, OH · Member since 2020 · 870 posts · 823 votes
6y

I would wholeheartedly agree. Simply ask them what happened and why they let those lines of credit go to collections. I'd also strongly advice doing your due diligence and speaking with references, past landlords, and I would probably ask for some business contacts. 

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  • Jon K.
    Rental Property Investor · Perry Hall, MD · Member since 2016 · 591 posts · 606 votes
    6y

    Are they active collections or were they settled in the past? If in the past, how long ago? Any eviction or bankruptcy filings? When you say great rental payment history does that mean that their current landlord confirmed they hadn't had any late payments during their occupancy?

    I care more about the story than the score. Life happens and sometimes people fall behind. What matters to me is what the past couple of years looks like. That, and I have absolutely zero tolerance for evictions or bankruptcies. So if the past couple of years shows that they have had active lines of credit: be it a car payment or credit card, etc. and they've paid on time along with no evictions or bankruptcies then I would continue to evaluate them with whatever other criteria you have.

    1Reply
  • Jin Kim
    Real Estate Agent · Santa Clarita, CA · Member since 2020 · 39 posts · 36 votes
    6y

    I agree with Jon and its more about the story rather than the credit score. If this was a property where you were screening for someone else, I would say decline because you would not want to held liable for a bad tenant. However since it is a property that you own, I would tell them you're considering them for the property but would like an explanation for the collection accounts. Or it may be the fact that they forgot they had credit card debts/loans and they are now into collection?

    1Reply
  • Dave SpoonerPro Member
    Rental Property Investor · Cincinnati, OH · Member since 2020 · 870 posts · 823 votes
    6y

    I would wholeheartedly agree. Simply ask them what happened and why they let those lines of credit go to collections. I'd also strongly advice doing your due diligence and speaking with references, past landlords, and I would probably ask for some business contacts. 

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  • Courtney King
    Real Estate Broker · Houston, TX · Member since 2016 · 159 posts · 86 votes
    6y

    @Wale Lawal I agree with everyone. I was in a similar situation last year with a rental I own in Pearland. I requested a double deposit ( $3700) they paid it and are still there! That's what I would recommend in your case...an additional deposit. I hope this helps!

    0Reply
  • Wale LawalBusiness Member
    OP
    Real Estate Broker · Houston | Dallas | Austin, TX · Member since 2018 · 5k+ posts · 2k+ votes
    6y
    Originally posted by @Jon K.:

    Are they active collections or were they settled in the past? If in the past, how long ago? Any eviction or bankruptcy filings? When you say great rental payment history does that mean that their current landlord confirmed they hadn't had any late payments during their occupancy?

    I care more about the story than the score. Life happens and sometimes people fall behind. What matters to me is what the past couple of years looks like. That, and I have absolutely zero tolerance for evictions or bankruptcies. So if the past couple of years shows that they have had active lines of credit: be it a car payment or credit card, etc. and they've paid on time along with no evictions or bankruptcies then I would continue to evaluate them with whatever other criteria you have.

    There only 1 active collection, 3 settled 4 years ago. No eviction, no bankruptcy, I have not confirm with their current landlord but I will. I was only going by their rental history from SmartMove report. Yes, life happens and I just don't want to judge them by couple of past collections/missed payments and that I why I wanted to hear from you guys experience. I will definitely increase the security deposit for this applicant.

    Thank you 

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  • Wale LawalBusiness Member
    OP
    Real Estate Broker · Houston | Dallas | Austin, TX · Member since 2018 · 5k+ posts · 2k+ votes
    6y
    Originally posted by @Courtney King:

    @Wale Lawal I agree with everyone. I was in a similar situation last year with a rental I own in Pearland. I requested a double deposit ( $3700) they paid it and are still there! That's what I would recommend in your case...an additional deposit. I hope this helps!

    I will definitely increase the security deposit for this applicant. I have thought about that myself. 

    Let's connect to discuss some property management opportunity. 

    Thank you

    [email protected]832-776-9582Podcast Guest on Show #469
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  • Ethan G.
    Attorney · Katy, TX · Member since 2014 · 397 posts · 215 votes
    6y

    I had a client similar to this and they have been great tenants for a while.  

    0Reply
  • Zachary Ray
    Investor · Durham · Member since 2017 · 589 posts · 251 votes
    6y

    I would agree with everyone in this thread, perhaps maybe beef up the deposit and move in costs for extra assurance if you like. 

    0Reply
  • Drew SygitBusiness Member
    Property Manager · Royal Oak, MI · Member since 2012 · 13k+ posts · 9k+ votes
    6y

    @Wale Lawal some thoughts:

    1) Do you have FILED tax returns to verify self-employed income? Applicants can give you tax returns they made up that they never filed with the IRS.

    2) How long has tenant had this business? Look up the statisics on how many businesses fail in their first 5 years.

    3) How long have they been at current rental? Did you verify who actual owner of property is via public records? Is it an individual or PMC? How did they pay their rent? If they paid cash to an individual, how much can you trust the rental verification?

    4) Did you verify rental history with PREVIOUS landlord? Current landlord may lie to get rid of a troublesome tenant!

    Get the max security deposit your state allows.

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  • John MorganPro Member
    Rental Property Investor · Grand Prairie, TX · Member since 2018 · 2k+ posts · 2k+ votes
    6y

    @Wale Lawal

    I’ve got tenants like this and they’ve been my best ones. They seem to want to stay forever and take great care of my places. I’ll keep signing 2 year leases with them and hope they’re lifers with me.

    0Reply
  • Wale LawalBusiness Member
    OP
    Real Estate Broker · Houston | Dallas | Austin, TX · Member since 2018 · 5k+ posts · 2k+ votes
    6y

    The property was rented to another well-qualified tenant.

    Thank You All.

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