What is the Minimum credit score a renter should have?

Question

Rental property in North Philadelphia Brewerytown area. Screening potential tenants and want to know what would be the Minimum Credit score landlords should be looking for with tenants?

Also I read that some landlords ask for a higher deposit from a potential tenant with a score lower than your minimum requirement.

Any thoughts on this topic?

Sheryl Sitman · Answer

It really depends on the tenant pool you are aiming for - which depends obviously on your property location. N Philly/Brewerytown can mean something different depending on the precise location and property type. You also need to be sure to comply with both state and city regulations. Using a tiered deposit system based on credit score can be risky legally if it's not applied uniformly. And taking more than 1 month deposit will soon mean that tenant must be given an option to pay the SD in installments (new city law passed this month). There are some great resources for Philly-centric landlord info to help you make these decisions. Feel free to reach out.

In some areas, you may find it is tough to get tenants with good credit scores. So sometimes, it is suggested to look at the reason for the bad credit and to look beyond the credit score. There are LLs who don't use credit scores and there are those who heavily rely on them. It's good to learn from experienced folks in your region specifically.

Chase Busick · Answer

@Jerome Bland, Usually setting a minimum credit score can be up to the individual, the property location & quality of home. Most likely, the better the credit score means the more likely they'll pay you back.

Myself & team have no set number, but the higher the better. Typically we look at the entire application & weigh credit depending on how their profiles are.. Usually will be more hesitant with people that have a ton of missed payments to utility companies, a ton of collections, & overextending themselves. Sometimes you may encounter people with low or no credit, because they might not have had any &/or are young. We don't consider too much on the medical side, but it can still be a consideration if it affects their debt to income ratio & how much they are bringing in. We have a 3x household income over the rent, with favorable references, rental history, landlord references, employment history & references, looking at how much money they have on hand & spending history via statements, as well as background, & criminal reports on top of credit.

Sometimes if they have than less than favorable criteria in meeting the standards/qualifications can result in approval with conditions. Conditions can include increased security deposit, increased move in payment up front, requesting a guarantor/co-signer, etc. This should be be justifiable, & made to most that apply that don't meet qualifications, unless they are very far off from where need to be in making an approval or lied about things, especially if any findings are recent & serious. Your application should include a general statement including them attesting that everything is correct & true...

Jerome Bland · Answer

@Sheryl Sitman thank you and we agree it is important to take into account the legal side, and learn from experience landlords. Appreciate the advice.

Russell Brazil · Answer

Mine is 620.

Matt Thelen · Answer

If you can, verify the identity of the person filling out the application. ID theft and mismatch is a big fraud theme I've seen and can be extremely costly.

Steve Babiak · Answer

I am a bit surprised that you have Philadelphia based landlords posting here, but they didn’t tell you about the Philadelphia specific regulation regarding screening and credit scores.

“Cannot have a blanket exclusion policy based solely on a credit score or tenant screening score”

That quote comes from the following:

https://www.phila.gov/media/20211014090131/Renters-Access-Act-tenant-screening-guidelines-20211013-rev2.pdf

I have rentals in the Philadelphia suburbs as well as in the city, and I use a score in the suburbs as part of the qualifying / rejection criteria - but in the city I use specific things found in the credit report other than the score. Things like no charge offs, no bankruptcies, no accounts in collections, no accounts delinquent by ____ or more days (fill in the blank with 30, 60 or 90), no delinquent utility accounts, etc.

But you have to be realistic in setting your criteria, the neighborhood demographics determine for the most part the characteristics of tenants that live in that neighborhood. Admittedly, Brewerytown is gentrifying and you should be able to find a decent tenant with fairly strict acceptance criteria in place.

Alan Asriants · Answer

As Sheryl pointed out, this really depends on your location, as well as property condition and amenities.

Don’t expect to attract tenants with 700+ credit scores if your property is stuck in the 1970s and located in a Class D neighborhood.

Higher-quality applicants expect two things:

• A solid location
• A well-maintained, updated property

A solid location

A well-maintained, updated property

Personally, I invest in A–B class neighborhoods, and when I screen tenants, I typically require a credit score above 700. For applicants who are just starting to build credit, I’ll consider a parent or co-signer. I’m very strict with my vetting process because I invest in high-quality finishes and solid locations—I expect my tenants to reflect that standard.

As for tiered security deposits:
Not only can that raise legal issues, especially depending on local laws, but it's not a reliable hedge against default. In Philadelphia, for example, two months of extra deposit won’t come close to covering unpaid rent, legal fees, or damages during an eviction.

Bottom line:
It’s almost always better to wait a little longer for a solid tenant than to rush the process—but be realistic about your expectations based on your property’s location and condition.

Jerome Bland · Answer

Thanks@Chase Busick great advice and we agree on not just looking at the score but taking into account the whole application and profile of the potential tentant.

Sheryl Sitman · Answer

Be sure to learn specifically about Philly - the laws here are very different than most of the country and even from the laws of PA. Just recently, city council passed legislation requiring landlords to accept the security deposit in installments - severely limiting your ability to mitigate against potential problems. We have an engaged FB group of Philly LLs to discuss how to navigate the city laws which is very helpful.

Jerome Bland · Answer

@Russell Brazil thank you for sharing. Appreciate it.

What is the Minimum credit score a renter should have?

What is the Minimum credit score a renter should have?

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