Prospective tenant checks all boxes but has bad credit
Rental Property Investor · The Shores of Lake Erie · Member since 2018 · 33 posts · 15 votes
Prospective tenant checks all boxes but has bad credit
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Member since 2021 · 2 posts · 13 votes
4yHow long has she been at the hospital job? I've often thought of stability as or more important that credit score. If she's been in one place for 9 years plus her job for several years as well those are two big pluses. I'd also ask the previous landlord for reference.
63 Replies
- Investor · Fort Washington, MD · Member since 2014 · 1k+ posts · 1k+ votes4y
Being that my portfolio for years consisted of 100% class Ds, nearly 100 percent of my clients had bad credit. It wasnt even worth the expense of evaluating it. However, I have had tenants that are good. I evaluate stability and how long they have paid rent somewhere else. If they have been in a stable job for a decade and pays consistently for multiple years or decades, is it reasonable to assume all the sudden they will say to hell with you and stop all the sudden? Some times people just need a break in life. So what they cant manage personal finances and maybe have a shopping addition. May not even be that; it could be something beyond their control. Either way, in the areas that impact you they have clearly demonstrated they qualify. As you can see here, all these people saying they would reject them; its part of the vicious cycle that prevents decent people from getting ahead. You giving them a chance may benefit an entire family. For me, its a no brainer and Id go for it.
- 4yBruce WoodruffPro MemberContractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
@Mark Cruse What percentage of your bad credit tenants worked out vs those that ended up being problems...? Just curious...
- Investor · Fort Washington, MD · Member since 2014 · 1k+ posts · 1k+ votes4y
Quote from @Bruce Woodruff:
@Mark Cruse What percentage of your bad credit tenants worked out vs those that ended up being problems...? Just curious...
Well if they were not section 8 most had to be evicted but that is due to having a very low base of people who can barely qualify for anything. The difference there is mine were very very very low income and no one would want to live there unless they had to. I got a lot of bottom feeders that would never make it anywhere else. However, I never got anyone who even came close to having a decade of paying rent somewhere on time or a decent stable job for a decade. When I let someone in, and they had a low paying job for maybe a year and paid rent to someone at least two years with good references, those are the ones that lasted the longest with no major problems. Right now, I have a tenant who i was going to reject. They didnt meet any of the criteria and due to my evaluation matrix they were very high risk. After talking to them several times and providing outstanding references I folded. I gave them a chance. Going on 4 years, NEVER late and by far pound for pound the best I ever had. I have been selling the lowest ones off but I wish I had at the time all tenants who had the criteria of the ones were art talking about here. It can strain you mentally but in general all of my portfolio has been a success aside from one. All in all, if you can make good judgement and know how to run your business you can sway a bit from saying hell no to everyone unless they meet this and that. Some people get caught up and sometimes just need a break. I have provided many.
- 4yBruce WoodruffPro MemberContractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
Quote from @Mark Cruse:
Quote from @Bruce Woodruff:
@Mark Cruse What percentage of your bad credit tenants worked out vs those that ended up being problems...? Just curious...
Well if they were not section 8 most had to be evicted but that is due to having a very low base of people who can barely qualify for anything. The difference there is mine were very very very low income and no one would want to live there unless they had to. I got a lot of bottom feeders that would never make it anywhere else. However, I never got anyone who even came close to having a decade of paying rent somewhere on time or a decent stable job for a decade. When I let someone in, and they had a low paying job for maybe a year and paid rent to someone at least two years with good references, those are the ones that lasted the longest with no major problems. Right now, I have a tenant who i was going to reject. They didnt meet any of the criteria and due to my evaluation matrix they were very high risk. After talking to them several times and providing outstanding references I folded. I gave them a chance. Going on 4 years, NEVER late and by far pound for pound the best I ever had. I have been selling the lowest ones off but I wish I had at the time all tenants who had the criteria of the ones were art talking about here. It can strain you mentally but in general all of my portfolio has been a success aside from one. All in all, if you can make good judgement and know how to run your business you can sway a bit from saying hell no to everyone unless they meet this and that. Some people get caught up and sometimes just need a break. I have provided many.
Good for you! I just don't have it in me any more. But as you correctly state, everyone could be a risky tenant...some high earners/high FICO feel entitled nowadays....I'd rather a a class D tenant :-)
- 4yColleen F.Pro MemberInvestor · Narragansett, RI · Member since 2013 · 8k+ posts · 4k+ votes
I would be inclined to have her show that she has paid rent consistently over the last year, that is what you are looking for in the end. She is invested in getting into your building, if she lives across the street you can see how she keeps her place. She isn't stretching her finances. I am less of a credit score person then what is the payment pattern and how quickly will they turn over. If you need to up your rents you may get some vacancies due to that.
Does she know her credit is that low?
- 4ySuzanne PlayerPro MemberAttorney · New York City / Long Island, NY · Member since 2020 · 597 posts · 248 votes
Are the items on her credit report actually correct? She should take a look at her credit report & go over it herself. Sometimes the same item goes through collections & gets duplicated, hitting the credit score several times. This is easier to see when it's an odd amount down to the penny.
Another reason for the low score could be the ratio of balances to limits. For example, if all her credit card balances add up to $1,900 but her total credit card limits for all cards combined is $2,000 (so only $100 of unused credit). If she doesn't have much unused credit, this can have a big effect on the score. Also, the reverse is true - having a lot of unused credit with very low balances tends to jack up the credit scores. (If you have a bunch of credit cards you never use, or a $50,000 untapped home equity line of credit.)
Can she show some extra cash in a bank account left over after she pays her 1st month rent & security deposit? Or a small retirement account (she's been working over 10 years)? Cash reserves are pretty good evidence that she manages her finances fine & won't give you any problems.
Getting her cancelled checks (or electronic payment record) is the only way to be sure the person paid their current landlord on time. Third party verification is the gold standard, no need to guess if the current landlord is accurate about the rent being on time. Although if you really want to be sure, you'd have to get the payments for the entire time she was there in case she was late more than a year ago, went back to on time payments, but never fully caught up.
You mentioned the property is on the shore of Lake Erie but this doesn't tell me what state. Certain states like New York make it extremely difficult to give a tenant a chance. But if your state is more reasonable, extra security deposit money might give you peace of mind.
- Contractor · shelby · Member since 2022 · 60 posts · 42 votes4y
I weigh far more heavily on stability and income over the credit score. Credit is an accurate snapshot of someone, but it is just that. A snapshot. I would be more concerned with how she paid her previous landlord and how long she had been on her job. With everything else being in place I would probably say yes also. Another plus in this situation is most of the time those in the medical field can always get extra shifts if they are in a bind and need some cash.
- 4yBruce WoodruffPro MemberContractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
Quote from @David Vaughn:
Credit is an accurate snapshot of someone, but it is just that. A snapshot.
Well not really. I would say it is more of a video taken over a few years.
- Member since 2018 · 37 posts · 11 votes4y
Brent, I had several tenants over the last few years that did not have great credit scores. The younger ones were all right, but didn’t take such great care of the place They did not have long work histories, nor did they work great jobs.
My latest tenant in my Nashville house not only had low scores, but did not have the 4x rent income your prospect has, but they were an extended family that wanted to be under the same roof. I insisted on speaking to the two landlords, and also a visit to their homes, on short notice. Ultimately these were extremely valuable as the landlords were positive (one party had a few latenesses of a few days, the other was stellar) and their homes were immaculate, and children well-behaved. They are my favorite tenants and have taken better care of my house than anyone else ever did. I think they buy a lot of furniture and electronics on credit, and it’s easy I think for something to get missed. Their furniture is nicer than mine, and the have eight televisions for the house, one in each room, and one more than the number of people living there!!! Me, I have one old crappy tv, not even a smart one! But I own four properties now on a pauper’s income from music, with very little debt. Some people buy stuff, others invest.
If you are not certain about this tenant, why not propose a short-term lease of, say, a few months, and let them know that if it doesn’t work out, you don’t have to evict because she will have no lease. If it does, you may be very happy you gave a working person a break. And the tenant will be grateful you took the chance, and be on notice not to mess with you. Certainly, a conversation about her low credit seems in order.
My experience with furnished STR was it was an awful lot of extra work with a lot of extra expenses that for me, did not make up for the increase in daily rent. But that's just me. I know there are companies that will manage it for you, but they have no incentive to keep your costs down. Some people and companies love it, but it's not for me personally.
Let us know how it turns out!
- Contractor · shelby · Member since 2022 · 60 posts · 42 votes4y
Bruce that's fair. I"m just saying in the rental business theres going to be some give and take. Most with great credit scores wouldn't be renting
- 4yBruce WoodruffPro MemberContractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
Quote from @David Vaughn:
Bruce that's fair. I"m just saying in the rental business theres going to be some give and take. Most with great credit scores wouldn't be renting
Good point. But there are still a lot of renters with good credit right? And I guess it could be a snapshot if there was one event that caused the score, like a BK. Hmmmm I dunno....I would avoid low credit renters, I'm just trying to make my life easy....
- Contractor · shelby · Member since 2022 · 60 posts · 42 votes4y
Diane i've been at this game for over 20 years. What I have learned for the most part is 90% of my tenants have been ok until their situation changes. Then it tends to go downhill. I guess someone with a higher credit score might care a little more about hurting themselves credit wise but in the rental side i've never seen that so much. What i have noticed as just in most other businesses the customers that are more stable and reasonable tend to be the most relyable and easier to deal with. There isn't one total magic combination to picking the best tenants. We have processes and minimum standards and still at the end of the day there is some luck involved.
- Contractor · shelby · Member since 2022 · 60 posts · 42 votes4y
Bruce I havn't seen to many with good credit personally, i guess good being a relative term. So i've never ran an ap and had a tenant come back over 800. Very few over 700. Snapshot in terms of say, divorce, plant closing in a single industry area of the nation, or major medical issue. All of which I have rented to remnants of in the past with both favorable and unfavorable results. One thing that seems to be a good constant in my selection process is I will not rent to someone with a violent criminal history. I do look at job history and I make them give me a very detailed list of where they have been living. I also am working on the website the underground landlord to help us warn one another about the really bad ones.
- Rental Property Investor · The Shores of Lake Erie · Member since 2018 · 33 posts · 15 votes4y
Quote from @Diane Perry:
Brent, I had several tenants over the last few years that did not have great credit scores. The younger ones were all right, but didn’t take such great care of the place They did not have long work histories, nor did they work great jobs.
My latest tenant in my Nashville house not only had low scores, but did not have the 4x rent income your prospect has, but they were an extended family that wanted to be under the same roof. I insisted on speaking to the two landlords, and also a visit to their homes, on short notice. Ultimately these were extremely valuable as the landlords were positive (one party had a few latenesses of a few days, the other was stellar) and their homes were immaculate, and children well-behaved. They are my favorite tenants and have taken better care of my house than anyone else ever did. I think they buy a lot of furniture and electronics on credit, and it’s easy I think for something to get missed. Their furniture is nicer than mine, and the have eight televisions for the house, one in each room, and one more than the number of people living there!!! Me, I have one old crappy tv, not even a smart one! But I own four properties now on a pauper’s income from music, with very little debt. Some people buy stuff, others invest.
If you are not certain about this tenant, why not propose a short-term lease of, say, a few months, and let them know that if it doesn’t work out, you don’t have to evict because she will have no lease. If it does, you may be very happy you gave a working person a break. And the tenant will be grateful you took the chance, and be on notice not to mess with you. Certainly, a conversation about her low credit seems in order.
My experience with furnished STR was it was an awful lot of extra work with a lot of extra expenses that for me, did not make up for the increase in daily rent. But that's just me. I know there are companies that will manage it for you, but they have no incentive to keep your costs down. Some people and companies love it, but it's not for me personally.
Let us know how it turns out!
thanks for the advise.
- Rental Property Investor · The Shores of Lake Erie · Member since 2018 · 33 posts · 15 votes4y
Quote from @David Vaughn:
Bruce I havn't seen to many with good credit personally, i guess good being a relative term. So i've never ran an ap and had a tenant come back over 800. Very few over 700. Snapshot in terms of say, divorce, plant closing in a single industry area of the nation, or major medical issue. All of which I have rented to remnants of in the past with both favorable and unfavorable results. One thing that seems to be a good constant in my selection process is I will not rent to someone with a violent criminal history. I do look at job history and I make them give me a very detailed list of where they have been living. I also am working on the website the underground landlord to help us warn one another about the really bad ones.
this has been my experience also. usually in the 600's rarly anything in the 700's. usually a divorce or something. I had one that was way upside down on a house after 08 and rented ever since.
- Lender · UT · Member since 2022 · 28 posts · 13 votes4y
@Brent Rieman it doesn't necessarily take something catastrophic to get someone to 480 if the big problem is just that they don't have enough history in general. If they only have four accounts on credit and they are all tiny balances and old delinquent, that would tank it compared to someone who has 20 accounts. It takes much more major issues to tank someone with a lot of history and multiple accounts.
- Member since 2018 · 37 posts · 11 votes4yI get that one wants a tenant with provable positive history of paying. But I am also thinking it is a very local issue; in NYC, a LOT of people rent, even some that could certainly afford to buy. In some areas, renters are generally more fly-by-night, and most people own their own homes. In certain professions where one might have to move a lot, renting is the norm.
Quote from @David Vaughn:
Diane i've been at this game for over 20 years. What I have learned for the most part is 90% of my tenants have been ok until their situation changes. Then it tends to go downhill. I guess someone with a higher credit score might care a little more about hurting themselves credit wise but in the rental side i've never seen that so much. What i have noticed as just in most other businesses the customers that are more stable and reasonable tend to be the most relyable and easier to deal with. There isn't one total magic combination to picking the best tenants. We have processes and minimum standards and still at the end of the day there is some luck involved.
I can tell you that when I went to rent my Nashville home, on the outskirts of Davidson county but near Percy Priest Lake, most who can, own, and there wasn’t a single renter who had a decent score for me to choose from. Even when I used a property manager, the scores were unbelievably low. I remember saying to a friend, “I didn’t even know was possible to have a score in the TWO’S!” - Rental Property Investor · Beavercreek OH · Member since 2018 · 422 posts · 970 votes4y
Quote from @Brent Rieman:
Looking for advice on a potential tenant. Ran application through rentredi. No criminal or evictions. Has been in same rental for 9 years. Moving b/c landlord is selling duplex and she has always wanted to live in my property. She has emailed me about once a year asking if I have openings. Im lakefront on lake erie and she lived across road. Solid income at 4x rent at a good hospital job. But her credit is bad, 480s bad. Looks like a bunch of small balance credit cards and such. She gave me her current landlords info and permission to contact. If all checks out with him im leaning towards a yes. Should I reconsider?
Hard pass.
There is no worse potential tenant then someone with good earnings and bad credit, IMO.
People with low earnings who struggle with paying bills is understandable. The opposite is true with individuals with decent income. Usually it is morally bankrupt people who have good income with terrible credit.
Just my 2 cents based on my experience.
- Investor · Anchorage, AK · Member since 2015 · 267 posts · 76 votes4y
Since her credit is the sticking point, you could run her credit a second time with a different vendor and see what comes up. For example, if you used a credit check on a PM software program like Buildium, your second check could be with TransUnion Smartmove. It might pick up things the first credit score missed to explain the score below 500
- Rental Property Investor · The Shores of Lake Erie · Member since 2018 · 33 posts · 15 votes4y
Quote from @Tricia O'Brien:
Since her credit is the sticking point, you could run her credit a second time with a different vendor and see what comes up. For example, if you used a credit check on a PM software program like Buildium, your second check could be with TransUnion Smartmove. It might pick up things the first credit score missed to explain the score below 500
It was on rentredi who i believe uses TransUnion also
- 4yCorby GoadeBusiness MemberInvestor · Boise, ID · Member since 2014 · 3k+ posts · 3k+ votes
Quote from @Brent Rieman:
Looking for advice on a potential tenant. Ran application through rentredi. No criminal or evictions. Has been in same rental for 9 years. Moving b/c landlord is selling duplex and she has always wanted to live in my property. She has emailed me about once a year asking if I have openings. Im lakefront on lake erie and she lived across road. Solid income at 4x rent at a good hospital job. But her credit is bad, 480s bad. Looks like a bunch of small balance credit cards and such. She gave me her current landlords info and permission to contact. If all checks out with him im leaning towards a yes. Should I reconsider?
Hard no. There has never been a situation in the history of earth where a landlord loosened their criteria for a tenant and it worked out. You have your criteria for a reason, right? You are asking the question because you are starting to feel the pain of vacancy...I can guarantee you that the pain of a crappy tenant is 10x worse. In addition, when you alter your criteria along the way, you open yourself up to fair housing violations- those are not fun.
Stay strong, wait for the right application.
- Rental Property Investor · The Shores of Lake Erie · Member since 2018 · 33 posts · 15 votes4y
Quote from @Corby Goade:
Quote from @Brent Rieman:
Looking for advice on a potential tenant. Ran application through rentredi. No criminal or evictions. Has been in same rental for 9 years. Moving b/c landlord is selling duplex and she has always wanted to live in my property. She has emailed me about once a year asking if I have openings. Im lakefront on lake erie and she lived across road. Solid income at 4x rent at a good hospital job. But her credit is bad, 480s bad. Looks like a bunch of small balance credit cards and such. She gave me her current landlords info and permission to contact. If all checks out with him im leaning towards a yes. Should I reconsider?
Hard no. There has never been a situation in the history of earth where a landlord loosened their criteria for a tenant and it worked out. You have your criteria for a reason, right? You are asking the question because you are starting to feel the pain of vacancy...I can guarantee you that the pain of a crappy tenant is 10x worse. In addition, when you alter your criteria along the way, you open yourself up to fair housing violations- those are not fun.
Stay strong, wait for the right application.
I hear you and I appreciate the feedback, What does everyone use for Criteria? I just evaluate each one as they apply. I have never set a hard line on anything. I did make this mistake of "feeling the vacancy" once before and deff learned my lesson. I lost 4k on that nightmare by the time it was over. That is not the case now. I put this question out here as I actually think she would work out great. works for a major healthcare system in a white-collar job with 100k+ income 4x rent, she side hustles cleaning AirBnBs in the area. Solid rental history 9 years with positive review of previous landlord. She is familiar with the neighborhood and has been contacting me for several years asking if I had vacancies. Seemed very well put together when I showed it to her. No evictions, no criminals. Seemed like a slam dunk and I was ready to send her a lease until I got the credit report back.
- 4yJared HottleBusiness MemberReal Estate Agent · Cedar falls IA Waterloo, IA · Member since 2020 · 902 posts · 549 votes
I agree with @Bobby Kelley a higher credit score is advantageous but stability in the job, makes at least 3x rent, and landlord references are more important to me. I understand credit score is important but I always think if they are a great candidate and had a good credit score they are most likely going to buy instead of rent. Obviously there are circumstances when this doesn't track but for the most part is true.
Jared Hottle Real Estate59 Reviews - Investor · Austin, TX · Member since 2021 · 9k+ posts · 5k+ votes4y
Credit reveals a lot about a person unfortunately. I've tried second chances, was not worth it
- 4yBruce WoodruffPro MemberContractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
@Eliott Elias, @Corby Goade, @Gary L Wallman Have it right IMO.
Read their postings over and over. This is not adding up. Why does the prospective tenant give as a reason for the low score? She must have some idea, right? Ask her and see if what she says adds up.
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