Tenant - Low Credit Primarily Due to Car Accident Litigation

Raleigh, North Carolina
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Tenant - Low Credit Primarily Due to Car Accident Litigation

Allison Park
Member since 2024 · 158 posts · 88 votes

I have a brand new 3 bd 2.5 ba Townhouse.  I have had it listed for just over a week.  I set the Credit Score as 650+ negotiable in Zillow and I had two immediate applications with very bad scores.  One was in the 400s and had a history of late payments and delinquencies and I rejected it.  The other is in the low 500s but stated that this is due to a car accident totaling her car and is in litigation, so she is not paying on the loan.  There is also another account with a small amount of $300 with some late payments.  

Question 1:  Should I just lower the credit score a bit (like 630) to allow for some flexibility and avoid getting applicants with staggeringly low scores?

Question 2:  Should I even consider the low 500s score?  The contingencies would be asking for a co-signer and checking landlord references.  She does not have any evictions or bankruptcies.  

Question 3:  I have 2 other similar Townhomes that will be ready late October.  Should I go ahead and list them now even though I would not be able to sign a lease until I close on them?

Other thing to note: I am ok with waiting a couple months to fill these vacancies, but by then it will be mid-winter (not that big a deal in Raleigh) but I understand there are probably fewer applicants during that time.

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John Clark
Member since 2018 · 1k+ posts · 1k+ votes
1y
Quote from @Allison Park:

I have a brand new 3 bd 2.5 ba Townhouse.  I have had it listed for just over a week.  I set the Credit Score as 650+ negotiable in Zillow and I had two immediate applications with very bad scores.  One was in the 400s and had a history of late payments and delinquencies and I rejected it.  The other is in the low 500s but stated that this is due to a car accident totaling her car and is in litigation, so she is not paying on the loan.  There is also another account with a small amount of $300 with some late payments.  

Question 1:  Should I just lower the credit score a bit (like 630) to allow for some flexibility and avoid getting applicants with staggeringly low scores?

Question 2:  Should I even consider the low 500s score?  The contingencies would be asking for a co-signer and checking landlord references.  She does not have any evictions or bankruptcies.  

Question 3:  I have 2 other similar Townhomes that will be ready late October.  Should I go ahead and list them now even though I would not be able to sign a lease until I close on them?

Other thing to note: I am ok with waiting a couple months to fill these vacancies, but by then it will be mid-winter (not that big a deal in Raleigh) but I understand there are probably fewer applicants during that time.

She got into an accident, so she stops paying her loan? Unless the litigation involves a manufacturing defect in the car, pass. Not the car manufacturer/dealer fault. She’s got wonky logic. Don’t get caught up in it.
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  • Lateefah Mathews
    Realtor · Atlanta, GA · Member since 2021 · 239 posts · 120 votes
    1y

    Hey @Allison Park these are great questions, and I'm glad you parked them here first. 

    Number one: You should just lower the credit score a bit. It’s ideal to see credit scores starting at 625 for rentals. That’s not something unreasonable. It's a safe baseline that also gives a starting point, but it doesn’t give an endpoint.

    Number two: Should you even consider the low 500s? NO. If you set your standards at 625, you keep your standards at 625 no matter what. The only other contingency would be asking for a cosigner at 600. That would be the bottom line, but I wouldn’t advertise the bottom line. If you get a tenant that meets all of the requirements, then you can actually say, I can safely bend the rules for a 600 credit score. Also, checking landlord references should absolutely already be a part of your profiling process, as well as checking the employment status and making sure that their paychecks and any proof of employment line up.

    Number three: Should you go ahead and list those two townhomes now? Yes. You absolutely can go ahead and pre-list your townhomes and make sure to 100% advertise that they will be ready for move-in and give a date. You can even give a timeframe, like October 25th through the 31st, applications are being accepted etc.

    Lastly: As far as you leasing to low score high-risk tenants right now...don’t fall for the low hanging fruit. Wait it out. If you wait it out, you wait for the right person, then the right person will be renting your brand-new townhome and not the wrong person. It’s harder to get someone out of there than it is to get someone in there. A vacancy is cheaper than a bad tenant

    3Reply
  • Allison Park
    OP
    Member since 2024 · 158 posts · 88 votes
    1y

    @Lateefah Mathews - thank you so much for the insights...going into update the credit score now.  This is super helpful!

    1Reply
  • Bruce WoodruffPro Member
    Contractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
    1y

    No point in having rules if you don't stick to them. Might as well just drop the rules and consider everyone on a case-by-case basis....right?

    1Reply
  • Pat LulewiczBusiness Member
    Realtor · Raleigh NC and Greensboro, NC · Member since 2019 · 393 posts · 392 votes
    1y

    A1: Lowering the score won't result in better tenants applying. People apply regardless because Zillow gives them a 1-time fee for an application ($35 for the first month I believe) so they dont lose anything by just applying everywhere.

    A2: Co-applicant/Guarantor can be a great option. I find they rarely have someone with a strong enough score, but its worth the optionality.

    A3: this may be an issue with the builder so I'd strongly recommend getting their permission first. It also puts you in a liability situation if they dont finish and close on time...give yourself some buffer on timing.

    Vacancy and demand - the winter isn't necessarily a bad time anymore; demand for high quality products is a year-round endeavor in Raleigh these days.

    1Reply
  • Allison Park
    OP
    Member since 2024 · 158 posts · 88 votes
    1y

    @Pat Lulewicz thanks, good to know about the Zillow Application.  Appreciate the insights!

    0Reply
  • John Clark
    Member since 2018 · 1k+ posts · 1k+ votes
    1y
    Quote from @Allison Park:

    I have a brand new 3 bd 2.5 ba Townhouse.  I have had it listed for just over a week.  I set the Credit Score as 650+ negotiable in Zillow and I had two immediate applications with very bad scores.  One was in the 400s and had a history of late payments and delinquencies and I rejected it.  The other is in the low 500s but stated that this is due to a car accident totaling her car and is in litigation, so she is not paying on the loan.  There is also another account with a small amount of $300 with some late payments.  

    Question 1:  Should I just lower the credit score a bit (like 630) to allow for some flexibility and avoid getting applicants with staggeringly low scores?

    Question 2:  Should I even consider the low 500s score?  The contingencies would be asking for a co-signer and checking landlord references.  She does not have any evictions or bankruptcies.  

    Question 3:  I have 2 other similar Townhomes that will be ready late October.  Should I go ahead and list them now even though I would not be able to sign a lease until I close on them?

    Other thing to note: I am ok with waiting a couple months to fill these vacancies, but by then it will be mid-winter (not that big a deal in Raleigh) but I understand there are probably fewer applicants during that time.

    She got into an accident, so she stops paying her loan? Unless the litigation involves a manufacturing defect in the car, pass. Not the car manufacturer/dealer fault. She’s got wonky logic. Don’t get caught up in it.
    5Reply
  • Allison Park
    OP
    Member since 2024 · 158 posts · 88 votes
    1y

    @Lateefah Mathews  Thanks for the recommendations!  I found a tenant this weekend who had a 635 credit score with no late payment and vetted well on all other qualification criteria.  Appreciate your advice!

    2Reply
  • Lateefah Mathews
    Realtor · Atlanta, GA · Member since 2021 · 239 posts · 120 votes
    1y

    @Allison Park That's excellent news! I'm so glad it worked out, that's exactly the kind of tenants you want and need. Best of luck with your future properties! 

    0Reply
  • Carlos Hennings
    Lancaster, NY · Member since 2021 · 92 posts · 53 votes
    1y

    I’d recommend checking whether she has any past judgments. Many screening reports don’t include that search, and judgments no longer appear on credit reports. I’ve seen applicants with clean backgrounds and only a lower credit score, only to later find out there were judgments from a previous landlord that wouldn’t have shown up on a standard report. I wouldn't lower your standards for someone else's financial decisions, just a thought. Good luck!

    1Reply
  • Zana Dzanan
    Rental Property Investor · Cary, NC · Member since 2025 · 2 posts · 1 vote
    11mo

    Hi Allison, 

    Question 1: Lowering the minimum credit score to 630 will not stop applicants with lower scores from applying. I suggest keeping the requirement at 650. Also, federal guidelines state that if you advertise a minimum credit score, that same standard must apply to everyone. You cannot make exceptions for some applicants and not others. I suggest reviewing the Fair Credit Reporting Act to ensure your process stays legally compliant.

    Question 2: It’s good that the applicant with a score below 500 does not have any evictions or bankruptcies. That said, a score in that range can still be considered higher risk. Also, if you decide to consider an applicant with a 500 score, you would need to make that minimum available to all applicants.

    Question 3: If you are not the owner of the home, you will need to get written permission from the legal owner before advertising the property for rent.

    0Reply
  • Brandon DunnPro Member
    Property Manager · Raleigh NC · Member since 2023 · 5 posts · 3 votes
    10mo

    Answer 1: The biggest thing is to stay consistent and not compromise. 600 is a standard requirement across the industry but if 630 is where you feel comfortable, stick with it. 

    Answer 2: No. The score does not tell the whole story and it is important to have a tool that can tell you about collections and charge offs. However, most of the time anything below 575 is best to leave be. 

    Answer 3: I would hold off until you officially close. 
    @Allison Park
    Thanks

    919-578-0052
    0Reply
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