Advice Needed: Rental Applicant with Credit Issues

15 Replies

Ok, so I've been debating this all day and I need some help from the community.
I have a married couple who want to rent one of my units and they seem very nice, but they have a checkered past with Credit.

Here is the scenario:
- Apartment for Rent $1500 / Mo
- 3 Bed / 1 BA
- No kids, no pets, non-smokers
- Class B Property
- On market for 2 weeks, multiple showings with only 1 applicant (husband/wife)
- Wife has superb credit, 800 FICO, no outstanding debt/loans, Income $70K
- Husband has good Income $90K, but credit is an issue.
 > Filed for Chapter 13 in 2010
 > Past Due Accounts sent to Collections in 2012 (ATT $1663, Comcast $574, Utilities $504)
 > 2 Judgments in 2012 ruling against him -- 2 credit cards for a total of $13K 
  > $2K Mortgage for Primary residence has 3 years of history with no late payments -- Home is currently in escrow.
 > Tax Lien $45K -- I presume this will be settled upon close of escrow of his P-Residence, but will verify
 > No Car Loans
 > He has a couple credit cards that have zero balance, no issues since 2012

According to them, they fell victim to the housing market crash and had 2 investment properties go upside down and could not find renters. That seems plausible and I would understand why they would become delinquent on the mortgages of their investment properties, but what gives me reason for concern are the accounts sent to collections. 

Perhaps I am over-analyzing this ... There hasn't been any bad credit issues in the past 3 years and their income covers rent by a factor of 13.3. I'm inclined to approve them based on the wife's financial profile alone, but require a deposit of 1.5 months rent based on the risk profile of the husband.

What are the thoughts from the members of the community?

Turn them down.

One of the things I looked at on a credit report is the type of thing they let go to collections.  In my opinion, a cable bill is a deal breaker.  If you can't pay your cable bill, first of all you turn it off.  Secondly, you pay off what you owe before it goes to collections.  Anyone who will let a cable bill go to collection, is a horrible risk.  If he can't pay his cable bill, he sure can't pay his rent.  And obviously, his cable is more important to him than avoiding bankruptcy.

Her good credit can't keep him from putting them both in debt.  She married a nightmare.  No need for you to get in the middle of that.  She won't be able to keep up with his spending, or gambling problem or whatever it is.  

They are a package deal.  Think of it in terms of two separate roommates who want to be on the same lease and one of them is a horrible risk.  Sorry, but you've got to turn them both down.

Do NOT ever, ever, ever waiver from your criteria.  How do I know this?  From learning the hard way.  I hope you don't have to learn the hard way, too.

Wait for the good tenant.  A bad tenant will always be more expensive than waiting for a good one.

@ Sue Kelly

Thanks for the words of wisdom -- Your points are all valid and hard to argue against. I will let them know of my decision asap.

@ Sue Kelly

So after informing them of my decision, she replied asking that I please reconsider. She even offered me 3 months rent as a security deposit. She also further reiterated that they have had no issues with their credit for the past three years and are taking measures to repair their credit.

I'm guessing you would still advise to hold firm with the decision, correct? 

Not one but 2 judgments!  No way would I rent to them.

My big concern is that I have heard it is very hard to get rid of someone in California so 3 months security deposit might not even get you through the eviction time.  I have had bad experiences with people that used to be homeowners and are now renting because of bad financial decisions.  They tend to not correct these things.  I got burned by this and it is very maddening to be told they are in dire straights and have no money for even a partial rent payment yet you see them dragging in lots of take out from a $30/person restaurant (where thye are not working at).

HA I was just about to write "wait for @Sue K. to find this thread and give you her opinion, because I know she's gonna have one about this" but I was too late. Sue K. found you!

Originally posted by @Lisa Ryan :

HA I was just about to write "wait for Sue Kelly to find this thread and give you her opinion, because I know she's gonna have one about this" but I was too late. @Sue Kelly found you!

 Bwaaahaaaahaaaaa!  I'm everywhere!  LOL!

Yes, I would still turn them down.  Tell them to come back when the credit is fixed :-)

This is also typical - they try to throw money at you.  If they could find someone else to rent to them, they wouldn't be trying to throw money at you.

Do a search on this forum of "why I don't take additional deposit money."  There was one recently with lovely photos.  And the additional deposit didn't touch the damage and cleaning bills.

One of the reasons these guys are such a bad risk, is that they haven't filed for bankruptcy "yet."  I'd be more inclined to take someone who had filed a Chapter 7 two years ago, and has clean credit since.  In fact, I've done so.

But, someone with current bad debt, just has to include you in their Chapter 7 and you are SOL.  

Oh, and they can include judgments in the Chapter 7, so getting a judgment doesn't protect you there.

Originally posted by @Sue K. :
One of the reasons these guys are such a bad risk, is that they haven't filed for bankruptcy "yet."  I'd be more inclined to take someone who had filed a Chapter 7 two years ago, and has clean credit since.  In fact, I've done so.

But, someone with current bad debt, just has to include you in their Chapter 7 and you are SOL.  

Sue K.

Actually, they declared Chapter 13 in 2010. Apart from that, the issues with their credit are contained to a period of time circa 2012. I would be ok if their credit woes were isolated to their failed investment properties, but what gave me reason for concern were the judgments (also in 2012) and the cable / utility bills that were sent to collections. (again in 2012). They are in the process of selling their primary residence and the credit report indicates no late payments on the mortgage (ever).  -- Which is why I thought about giving them the benefit of the doubt and a 2nd chance. Does that change your mind at all?

And for the record, the building is located in a suburb of Chicago (not California).

Originally posted by @Louis A. :
Originally posted by @Sue Kelly:
One of the reasons these guys are such a bad risk, is that they haven't filed for bankruptcy "yet."  I'd be more inclined to take someone who had filed a Chapter 7 two years ago, and has clean credit since.  In fact, I've done so.

But, someone with current bad debt, just has to include you in their Chapter 7 and you are SOL.  

@Sue Kelly

Actually, they declared Chapter 13 a little more than 2 years ago and their credit has been spotless since then. The issues with their credit are contained to a period of time circa 2012. I would be ok if their credit woes were isolated to their failed investment properties, but what gave me reason for concern were the judgments (also in 2012) and the cable / utility bills that were sent to collections. (again in 2012). They are in the process of selling their primary residence and the credit report indicates no late payments on the mortgage (ever).  -- Which is why I thought about giving them the benefit of the doubt and a 2nd chance. Does that change your mind at all?

And for the record, the building is located in a suburb of Chicago (not California).

 Ha!  Yes, this would change my mind!  I'd have preferred a Chapter 7, but they probably weren't allowed to file a Chapter 7 because of their assets.

So, sound the bells - I changed my mind!  I think these guys are a decent risk if the income pans out.

So, they have no landlord references, though, because they're still in their home?  

Even still, yes, I think I might take a risk on these guys.  Are they otherwise polite - both of them?  Respectful to you?  People you'd be comfortable dealing with?  If so, then I would likely rent to them, if I didn't have a better applicant.

This really changes things.  If they aren't on the brink of a divorce, LOL, then they will probably stay several years, too.

So, if it's legal to take the additional security deposit wherever the property is, then let them give it to you.

Whew.  I'm exhausted :-)

Originally posted by @Louis A. :
Originally posted by @Sue Kelly:
One of the reasons these guys are such a bad risk, is that they haven't filed for bankruptcy "yet."  I'd be more inclined to take someone who had filed a Chapter 7 two years ago, and has clean credit since.  In fact, I've done so.

But, someone with current bad debt, just has to include you in their Chapter 7 and you are SOL.  

@Sue Kelly

Actually, they declared Chapter 13 in 2010. Apart from that, the issues with their credit are contained to a period of time circa 2012. I would be ok if their credit woes were isolated to their failed investment properties, but what gave me reason for concern were the judgments (also in 2012) and the cable / utility bills that were sent to collections. (again in 2012). They are in the process of selling their primary residence and the credit report indicates no late payments on the mortgage (ever).  -- Which is why I thought about giving them the benefit of the doubt and a 2nd chance. Does that change your mind at all?

And for the record, the building is located in a suburb of Chicago (not California).

 Oh, Gosh, I'm sorry, I just read this again and changed my mind back LOL!  

I just noticed the dates.  So they filed bankruptcy in 2010, but then had collections and judgments 2 years later?  That aren't included in the bankruptcy?

I was thinking they'd filed bankruptcy and been clean since.  But, that doesn't appear to be the case, unless I missed something.  So, they filed bankruptcy, and then let their cable bill go to collections?

Sorry, but they're a bad risk.  There's nothing here to tell me they wouldn't let what they owe you go to judgment, too.  

I don't know how often they can file for bankruptcy when it's a Chapter 13.  But, the fact that they filed for BK, then proceeded to continue trashing their credit, just doesn't bode well.

Sorry.

@Louis A.

I just looked up the bankruptcy laws.  They can convert their Chapter 13 to a Chapter 7:

http://www.nolo.com/legal-encyclopedia/converting-...

I'd say it looks like that's what they're planning to do.  They can file a Chapter 13 to keep their property, then later convert to a Chapter 7, if they can't make their payments or decide they no longer want to keep the property.

Their behavior indicates to me, that this is what they plan to do.  They, in my opinion, didn't file the Chapter 13 in order to clean up their credit, but to be able to stay in their house longer.  Then they went ahead and ordered HBO, etc., etc., and let everything go to collections.

To file a Chapter 7, you can't appear to be racking up bills that you intend to file on.  Maybe their attorney told them to knock it off, so they can still file the Chapter 7 after they move out of their home, or maybe it's coincidence.

But, these guys look like a Chapter 7 waiting to happen, afterall.

@ Sue Kelly

Very good point -- You are probably right.

Thank you again.

@Louis A. Have you checked out Pacer? it has the court portal to access the documentation from the BK and based on the info they gave you in the application it should be easy to find. In my application process the discharge is required documentation for any applicant to make it easier to find in Pacer. No discharge = no rental.

I would approve them except the judgements are a non-starter.  He not one, but two.  Only way I would allow them in one of my places is six months of pre-paid rent.

I don't worry about score, I worry about whats on your report. Evictions, Garnishments, and Judgments are always a no no.

I don't want the phone call on the 25th of the month they don't have any money because of their check or bank account was garnished.

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