Credit score red flags?

Question

I have a studio unit and one of my screening criteria is a 650+ credit score. i have an applicant who applied and has a 707 score, but the credit report is flagging a few things.

1. Not enough available credit on revolving accounts

2. Insufficient payment activity over the last year

3. Too many recently opened accounts

4. Recency of a balance overlimit on a bankcard account

I looked at the month to month detail and I don't see a specific month that the issues occured.  I understand what these mean, but how should I weigh these in my screening?  Are these red flags or nothing to worry about since her overall score is above my threshold?

Richard F. · Answer

Based on the details flagged, it could be they ran into serious difficulty within the past 4 - 6 months, and their score is possibly dropping each month based on new reporting.

#1, what are the stated limits of each account, what is current balance? Multiple high balances (over 50% of current limit) is a potential serious issue, if they are "living" off of the credit.

#2 Insufficient activity early in the year further indicates possibility of a major change in their life.

#3 Ditto! Potentially trying to get more credit before score drops, max out, then file bankruptcy.

#4 Ditto again! Recent over limit, possibly using one card to pay off another.

Find out what their CURRENT Bank / investment account balances are with original statements and verification.

This is precisely one of the reasons I always advise not to use a credit or rentability score as a minimum criteria. High scores can hide exactly the situation I have laid out above. Low scores may be the result of issues out of a person's control, such as medical, or divorce, foreclosure, and other issues that in reality have no bearing on what they are capable of paying today. You need to always examine all of those details, and think about what they might be telling you. Then ask questions of the applicant to find out more...but accept only documents, not mere words!

Jaclyn King · Answer

Rent to income would be x3.09

Chris Seveney · Answer

707 is still a good score but it sounds like the recently maxed out some accounts. So that could cause some challenges on making payments. What is their income ratio?