Woodland Hills, CA · Member since 2016 · 1 post · 4 votes
First time landlord working with a property manager to rent a large, very clean, single family home in a Los Angeles suburb.
What are acceptable tenant credit scores and requirements for cash reserves? I see that my initial expectation of credit at 750 was hugely unrealistic. Any insight appreciated.
@Diane Savoian - I agree with what both @Jon K. and @John Morgan said. I have great tenants that have low credit scores. Remember, you are NOT your target tenant. When someone is renting there is a reason - they don't have good credit, they can't save up a downpayment, they have past medical bills, etc. Those can be great tenants and stay long term. Imagine if you rented to yourself, you'd probably have high standards and buy within a year. Not the target.
There’s some really great advice on this thread. I normally set it at 650. My best advice is always try to look at the bigger picture. Is the score low because the renter is young and hasn’t had time to build credit, or is it low because they have numerous collections against them? I’m trying to find someone that seems stable and has a history of paying their bills. So keep an eye on the number of derogatory marks on the credit report, and collections. I try to steer clear of bankruptcies, Felonies, collection accounts, evictions and sex offenders.
Also it’s very helpful if you can contact both their current and previous landlord. Their current landlord could have motivation to give a good reference just to get them out. The landlord before that will tell you the truth.
Good luck, Good thorough screening now will save you a lot of trouble for the rest of the year.
My company has tightened our screening criteria since Covid brought on restrictions on evictions. We look for 700 min but if it is close we will make exceptions for applicants with strong reserves and stable income.
@Diane Savoian @John Morgan hold on, where are you guys finding these renters with credit scores over 500? Where are you finding renters with any credit for that matter? Totally kidding, but I’m not!
In my C world credit is tossed out the window otherwise I would have no renters. However I’m looking for key indicators like owing utility companies money, check cashing collections, cell bill collections. The we combine that with their criminal history and ensure there is no eviction history. However, I will take someone with an eviction depending on timing. And lastly, I look them in their eye and figure it out.
I do not do this in our B or A properties, but score doesn’t matter as much as what’s driving the score.
I run 3% or less vacancy rate on hundreds of doors. Actually my worse tenants are the ones that have good credit. Maybe it’s because they hit a road block and had to settle for C but in the back of their mind they really feel they should be in B? They tend to be a little more needy.
Set a combination of score and habits. Example: 750 with five open collections = garbage. 650 with zero collections / negative reports and $30k savings = yes.
There is some good advice on this thread. I built an algorithm of sorts to screen tenants. Here is one thing that happened to me. A lady had a good credit score. I check their name manually to see if there were any local civil lawsuits against this person and evictions. I found some of this stuff doesn't always hit one's credit score.
There was a bunch. My theory was that she got her credit professionally cleaned up. I've met someone that reversed his bad credit this way. Anyway, the lady was high risk, despite her decent credit score.
@Diane Savoian I understand why credit score is a "go-to" screening factor for tenants by most, but fact is all that is BS, it really is, and actually a setup for failure.
The idea that we can set some numbers and when a applicant meets or exceeds those "hallelujah praise baby-Jeasus we got us a good one", well it's a turd sandwhich, dress it up as fancy as you like it's still just crap.
The #1 most important item is will this tenant destroy my property.
#2 will this tenant pay me, all the time and on time.
No combination of numbers will ever tell you either of those things. How a person will treat your property requires reading who that person is, are they negligent, slobish, empathetic, fearful, who are they as a person. Next, who do they associate with. Get 1,000 experienced landlords in a room and say "baby Daddy Drama" and get ready to hear the most universal sigh you ever heard in your life. Numbers won't speak 1 word to that.
Where a person works and has worked speaks to personality. How they dress, speak, drive.... How about this, check out the in side of their car when an applicant pulls up, how that is will be your property.
I look at credit but to gauge history, I am looking for judgements and things like that, I don't care what the 3 digits say other than a guesstimate on how long tenancy may be. Income is factor #1, they can be greatest person in world but no money is a deal dead. Then it's reading person and that's it.
Personally, I LOVE service persons; give me nurses all day long, best tenants ever. Police, fire, ambulance, always good BUT notice the common theme here, occupations that have an empathy factor. This is how you gauge for what really matters, how will they treat your property and how will they pay.
Credit scores play a big role in the screening process but it all depends on where you are. Here in Pawtucket RI, it’s really hard to find a tenant with a 600+ credit score. Some people don’t even have credit.
Keep everything fair & simple terms is your best bet.
Minimum
requirements:
$2,500 per person
gross income
Credit score 590+
No Evictions
Good references
Clean Background
Last 2 recent paystubs
Proof of 2 months reserved fund Or savings (2X the rent)
1 person $900
2 people $1000
2 people max
1st month’s rent and deposit required to move in...
This is a requirement I used for a studio apartment. Very simple.
In short, it depends. My tenant in my first rental had recently separated from her ex hubby, had amazing credit, and technically could have bypassed renting to buy a home. She had never rented a property on her own before, so there was no prior rental history. She had just started a job, the first she had since having her child.
Was she a risk? Yes. Her 783 FICO tells me she wasn't, however I still took a larger than normal deposit and she willingly paid it.
My company has tightened our screening criteria since Covid brought on restrictions on evictions. We look for 700 min but if it is close we will make exceptions for applicants with strong reserves and stable income.
A friend of mine who has rentals in the Greater DC area advised he has done the same. It has almost completely changed the demographic of his intended renter heading into 2021.
@Diane Savoian depends I’ll say 690 and up . All is based on their history . There’s people who are just starting . You have to screen them . If credit history has collections , late payments on a card I’ll pass .
We look for a 600 minimum credit score, no evictions, no felonies. Most renter are going to have dings on the report, but we do have 2 tenants with 700+ scores as well.
@Diane Savoian in your post you say that you are working with a property manager. I would suggest letting them tell you what the applicant criteria should be. They will have a process in place that is right for the class of property and protects you and them from any fair housing claims.
We advertise 600 as a requisite to rent with us but if I was strict about it I wouldn't be able to find any renters in my area (South Texas). It is almost like nobody really understands how it works and the value of having a good credit in my area and neither did their parents so the scycle continues. So yeah, most my tenants have around 500ish, but have a good income and no evictions. ALWAYS look at evictions.
Credit scores tells just a part of the story. I do not rent to those with a prior eviction. They will all have stories as to why this happened. DO NOT rent to them no matter how pleasant the story sounds. Open judgments. Forget them too.
My Dad did private investigations for landlords decades ago. He told me to go look at their cars. If they were dirty inside you can bet your rental will be dirty. He would go look to where they currently live. Is the yar not well kept? Junk outside? It is best to go slow then be in a big rush to rent!
We have several qualifications that an applicant must meet in addition to credit score. For example, no prior evictions, no owing another landlord money, nothing in collections, no judgements, verifiable income.... and no unsatisfactory credit.
I look for a score of at least 600. It's more important to understand what makes up the score. Late payments, why they are late and mostly historical. People are renting for a reason, no down payment, poor credit score, etc. You want a long term tenant anyway. I look at past evictions, job history, income, debt, and DTI as well (45%).
Hey Kenneth - my wife and I were just discussing DTI recently. How do you get an accurate look at an applicant's DTI? Our background check doesn't seem to really yield enough information to know.
When you run there credit it should give you car loans, personal loans and credit card information with balances and monthly payments. I also request that information on the application. I then add the rent to the total and calculate the DTI.
Credit scores tells just a part of the story. I do not rent to those with a prior eviction. They will all have stories as to why this happened. DO NOT rent to them no matter how pleasant the story sounds. Open judgments. Forget them too.
My Dad did private investigations for landlords decades ago. He told me to go look at their cars. If they were dirty inside you can bet your rental will be dirty. He would go look to where they currently live. Is the yar not well kept? Junk outside? It is best to go slow then be in a big rush to rent!
If I had a hundred dollars for all the people I knew who had messy cars but spotless kitchens, I would have enough to buy another rental :)
@Candice Blair You have pretty high standards. Why wouldn't that renter just buy a home or condo.
She's in Orange County, CA. The bar to entry is very high. You can have an extremely high credit score and a good income. However, if you are paying 3-4k per month just for rent, you are going to find it hard to save up enough of a down payment.
You can target around a 700 credit score for your area, I do. ...but keep in mind a little below that is still “fair” credit. I take the approach of evaluating everything on the credit report to see if the reason for a lower score is something that would be a deterring factor. Sometimes from looking at the report you can see that people may have been in past credit trouble, but are now been battling back.
Also don’t forget to look at their total monthly credit payments due as an evaluation factor.
Lastly, don’t be afraid to ask the applicant about things you see on the report to gain insight. I do all of this and then give a comprehensive report to my clients (the property owners).