Bad Credit : ezLandlordForms

V

Valerie K

started a topic over 15 years ago

If someone is upfront and says they have damaged credit due to almost loosing their home. They were able to sell for asking price, but missed some payments hence the bad credit. My rent is only $250 - $300 less than the mortage. I will get proof of income and will review credit report. What should income to debt be? And does this sound risk since she could not make mortgage payment? She also went through divorce last year.

D

Denise S

said over 15 years ago

People unfortunately suffer financial hardship. This seems like more lately than ever. I would check income and have her give you proof of the income like paystubs. Verify what she has told you against the credit report. In my experience, I have found that when there are utility bills, like electric; phone or cable showing up in collection on a credit report, this can be a red flag. Obviously if they have ever been evicted, I stay away fro that as well. I believe mortgage companies use 35% for Income vs debt. That usually means that the payments towards debt should not comprise more than 35% of income. I like my tenants to be able to apy for the rent with about 1.5 weeks salary. That is a safe bet.

P

Patty H

said about 9 years ago

It is a hard choice every landlord has to make, they may be the best tenants you've ever had. Look at the credit report and see why their credit is bad. It could have been from a past long ago, falling on hard times. Usually by looking at what has caused the bad credit will often tell you the type of tenant they are. Also get references from past landlords. If there is a co-signer that is another layer of support that you have. Tread lightly, do your research and good luck!

C

Cheryl H

said about 9 years ago

I'm new at this also. I rented out my property for the first time just over a year ago. But after paying someone a $1000 commission to find me tenants who left $2000 in damage when they left a few weeks ago (and there's not much left of their security deposit to cover it because they paid late a few times and then they refused to pay the last half month's rent), I'd agree with the previous poster. My previous tenants had near-perfect credit, mostly because they were young and didn't have much rental experience or credit history to begin with. I also just rejected a potential tenant before even checking her credit (she claimed to have great credit, and that may well have been true) just because she refused every option I offered her regarding deposits and terms, insisting that her great credit should entitle her to better deals than I ever got in the 15 years that I was a renter. Sure I want someone that will pay (and the fact that she kept pushing for less money was a red flag in itself), but I also want someone who will not give me a hassle. I'm looking at some people now that don't have perfect credit, but it's all student loan debt and what they told me before the credit check has checked out. Personally I would be ok with someone with less than perfect credit if those issues were due to medical bills, student loans, related to a divorce, or some other circumstances. Bad credit because they always pay things late or not at all? Obviously that would be a different story.

L

Linda N

said about 9 years ago

Lets face it, when it comes to bad credit and rental applicants they almost go hand in hand. It is cheaper to be a home owner in many cases but folks who are usually tenants in many cases cant qualify for a home purchase due to their credit with some exclusions; big cities, military, erratic employment assignments, and so on. The credit check is not meant to be the end all tell all for landlords and property managers, nor is it intended to base a persons deposit amount on. This is simply one of the many tools during the application process that allow a property manager to piece together the puzzle of will this be a good tenant. Don't use the FICO score to determine applicant worthiness. You use it as a red flag to investigate more into that persons reported payment history. You really should not even base your decision heavily on current landlords reference because if they are a bad tenant and the current landlord doesn't give them a good reference then they are potentially stuck with them. The application should be designed to be your crystal ball into that tenants world finding out as much as possible without crossing legal boundaries. So to answer your question, unless you have an over whelming amount of applicants with awesome credit (which I doubt) yes you should at least be considering those applicants. Having a co-signer is a great option, when you have one your just not sure of because it allows you to hold multiple parties responsible for everything making it all that much easier if it get to collections or court to collect the funds due. Word to the wise, if you are going to have a co-signer they should be putting in an application as well and you should be doing everything you would do for each app, credit check, criminal background, present income and job verification, past employment verification, rental references of last three rentals or last five years, verified emergency contact, verify references, and last and most important if possible the surprise drop by once you have finished processing the app. This is the biggest thing we use. What you do is stop by their current residence. This is your last defense that most tenants don't expect. It's an opportunity to see if they are keeping their current home in a condition that you would want your property kept in. If they are not local try google maps and use it to go down the street to at least get a look at the outside. This works especially well if they have been there more than one year as google updates about that often.

M

Maria F

said about 9 years ago

I have a tenant that I screened recently that came back with a bad credit report. Additionally, the significant portion of his income is from his own business (which I requested a copy of his 2014 1040 tax return). After I sent him the denial letter, he offered to pay rent six months in advance. Now I'm not certain if I should consider renting to him if I have six months' worth of rent up front.....