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Even if you do know how to screen tenants, all tenants are a risk. Even the FBI, with all of their resources, occasionally makes mistakes with their screening. Half of my applicants are lying on their application. Some lies are easy to catch, some not so much. There is always the risk of missing something in the screening process. With a new tenant I don't start to relax until after they have been there for a few months and are behaving well.
Low income tenants living on welfare tend to be very obvious about the risks involved.
I don't find the credit score all by itself to have much value for screening. What's on the credit report itself is useful, but not everything needed to know about an applicant before making a decision.
Credit score is the number one indicator for tenant risk, bar none. It is not only a financial indicator, it is a personal behavioral indicator. I screen tenants not just for myself, but a large apartment complex. I have countless examples of bad tenants, all have bad credit, generally under 600. And it's not all about paying rent. It is the condition of the property I get returned to me. I like a 625+ credit score, for all occupants 18+ in the dwelling.
Income will tell you the persons ability to pay rent, credit score will tell you the person's desire to pay rent. My guess is that applicants that lie on the application have a low credit score, among other defects. If I have 10 applicants, and only ione is bad but I do not know which one, I would rather reject all 10 than take a chance.
If you do not use credit score, what do you use? And would it pass a fair housing test? Because Credit Score is as color blind of an indicator as you can get. Any other test is suspect and likely too subjective to pass.
Credit score is the number one indicator for tenant risk, bar none. It is not only a financial indicator, it is a personal behavioral indicator. I screen tenants not just for myself, but a large apartment complex. I have countless examples of bad tenants, all have bad credit, generally under 600. And it's not all about paying rent. It is the condition of the property I get returned to me. I like a 625+ credit score, for all occupants 18+ in the dwelling.
Income will tell you the persons ability to pay rent, credit score will tell you the person's desire to pay rent. My guess is that applicants that lie on the application have a low credit score, among other defects. If I have 10 applicants, and only ione is bad but I do not know which one, I would rather reject all 10 than take a chance.
If you do not use credit score, what do you use? And would it pass a fair housing test? Because Credit Score is as color blind of an indicator as you can get. Any other test is suspect and likely too subjective to pass.
No, a credit score is a snapshot at the moment of a person's credit worthlessness. A person can be highly qualified but with a bad score due to a single event. As mentioned, most landlords tend to look at the credit REPORT, not just a score as the Report provided details. If an applicant credit score took a bad hit when bills piled up over a prolong hospitalization from a bad auto accident, that means less compared to someone who's score looks good but shows multiple late payments on multiple accounts. Scores are what amateur landlords use.
No, a credit score is a snapshot at the moment of a person's credit worthlessness. A person can be highly qualified but with a bad score due to a single event. As mentioned, most landlords tend to look at the credit REPORT, not just a score as the Report provided details. If an applicant credit score took a bad hit when bills piled up over a prolong hospitalization from a bad auto accident, that means less compared to someone who's score looks good but shows multiple late payments on multiple accounts. Scores are what amateur landlords use.
Haha. A credit score, for responsible people, doesn't change much in any given month/year. Even the 2008 recession did not change credit score distributions much at all. A credit score is NOT a snapshot. It is a score with the latest credit information, and much of the information for the past several years. It changes often, but mostly doesn't change much. Unless the person screws up.
The average tenants credit score is 658. Only 2% of the population has a credit score sub-500.
How do you quantify, in writing, how to make use of a credit report? In other words, if I am an applicant, and I want to know upfront if I will be rejected or not, what is your written criteria for acceptance or rejection? In MN, it's the law to have a written criteria.
I will pass on those tenants with a low credit score and have an easier time as a landlord, I will leave the weak tenants for someone with more time than I do. I know I changed a complex of 120 units from being a dangerous place to live, where you could not get a pizza delivered or a cab to pick you up, to being a normal complex.
With 24+ renters, I have not had an eviction in years, and late payments are few and far between. Maybe 2-3 in a year, across 288 payments.
Last edited by FIREin2016; 05-07-2018 at 06:23 PM..
How do you quantify, in writing, how to make use of a credit report? In other words, if I am an applicant, and I want to know upfront if I will be rejected or not, what is your written criteria for acceptance or rejection?
Our criteria is NO negative/adverse credit reporting that can not be adequately explained. We reject all unless a waiver is granted. A waiver isn't required to be explained as it's a discretionary prerogative of the owners.
Quote:
Originally Posted by FIREin2016
In MN, it's the law to have a written criteria.
Can you point me to that law as my copy of the statutes states I must have a written criteria If I am collecting an application fee. I can't find anything that says I must have a written criteria on credit worthiness (other than the FCRA) if I'm not asking for an application fee upfront.
Our criteria is NO negative/adverse credit reporting that can not be adequately explained. We reject all unless a waiver is granted. A waiver isn't required to be explained as it's a discretionary prerogative of the owners.
Can you point me to that law as my copy of the statutes states I must have a written criteria If I am collecting an application fee. I can't find anything that says I must have a written criteria on credit worthiness (other than the FCRA) if I'm not asking for an application fee upfront.
You are correct, "You must have a written criteria If you am collecting an application fee". As long as it can be written down, and is objective with many different people coming up with the same conclusion, you are subject to bias. I can state 625+ credit score, and have the same result even if 1,000 people read the reports and criteria.
I collect an application fee. Rarely do I get anyone that doesn't pass, because the applicant knows their credit score. I also have criteria for criminal records and income verification.
How do you quantify "Adequately explained"? Would 100 people, looking at the same report and guidelines, come up with the same result? Would any tenant lie on the explanation? Would this prerogative seem to exclude protected classes more than others, that may better be able to play the explain game?
Does one 30-day late payment constitute adverse credit reporting? Or a paid collection? How many accounts does it take? If someone has two bad accounts, but 40 good ones, compared to someone with just two bad accounts, are they treated the same?
I do this for a living. It's my own pocket that get affected if I screw up, not an imaginary corporate giant. I know credit score works, and I do not change my criteria for sob stories. It's far too easy to get a solid credit score, I do not need to waste my time with people that lie and cheat their creditors.
Being judgmental is not always "having or displaying an excessively critical point of view."
S&M you are cheating a bit...
judg·men·tal ˌjəjˈmen(t)l/Submit adjective adjective: judgemental of or concerning the use of judgment. "judgmental errors" having or displaying an excessively critical point of view. "I don't like to sound judgmental, but it was a big mistake" synonyms: critical, censorious, condemnatory, disapproving, disparaging, deprecating, negative, overcritical, hypercritical "he's compulsively judgmental"
The secret is to allow the law to work for you. We reject everyone with a repeated adverse reporting. However, an applicant is told in advance that if there is adverse reporting that has mitigating circumstances, they are welcome to explain it and seek a waiver. There is no requirement or conditions in the law that regulates how we apply a waiver. We are making an exception based on the applicants explanation otherwise, they are rejected. Unfortunately, way too many landlords complain about laws and restrictions while never using what that law or regulation doesn't cover to their advantage.
Since credit scores can lag reality of credit worthiness, seeing the reporting is more in-tune to current habits. It has not failed us yet and our PMC has never had to evict or take action based on late payments or financial issues that were not based on serious emergency situations.
The secret is to allow the law to work for you. We reject everyone with a repeated adverse reporting. However, an applicant is told in advance that if there is adverse reporting that has mitigating circumstances, they are welcome to explain it and seek a waiver. There is no requirement or conditions in the law that regulates how we apply a waiver. We are making an exception based on the applicants explanation otherwise, they are rejected. Unfortunately, way too many landlords complain about laws and restrictions while never using what that law or regulation doesn't cover to their advantage.
Since credit scores can lag reality of credit worthiness, seeing the reporting is more in-tune to current habits. It has not failed us yet and our PMC has never had to evict or take action based on late payments or financial issues that were not based on serious emergency situations.
It sounds like your system works for you, and mine for me.
I am still unsure what the definition of adverse reporting is, and how it can be applied consistently. 1 late? 2 lates? Two out of two accounts late? Two accounts out of 40 late? A paid off collection or a settled one? To me, there is far too many variables that it could never be applied consistently.
With the credit score, which takes all of the information provided and combines it to a single number. More recent criteria is more important than older criteria, as older stuff eventually drops off. I can check and decline in a few minutes, not wait for explanations. And I can compare the required credit score for all occupants, even the 18-year old kid.
Hopefully we can agree that positive past landlord checks are suspect at best.
I'll share my experience with you. So first off I think anytime you get the government involved in our life and private business transactions it's not a good thing. Then of course we hear all those horror stories about section 8 tenants, not all are bad but there's enough to warrent some hesitation.
I have a rental house, not the greatest block, but it is in one of the top school districts in the state. I had a great tenant for 4 years, family, both worked, good credit score, good income, paid rent on time.They moved out so went to rent it and literally out of 50 plus people contacting me every one of them asked about section 8.
I wound up hiring a property manager and told them I was at least open to section 8. They came to me with an application a family who was living on some religious community out west who had moved here, were recent immigrants, pastor spoke very highly of them.
They moved in, 5 or 6 adults living in the home, state pays something like $1300, they pay $175. First month they were 15 days late on rent. Prop management threated eviction to show them this wasn't okay, fortunately state paid me $1300, my mortgage is only $700 including taxes and insurance and everything so even if they don't pay me I'm still in the green, though obviously I wanna get all my money.
Since then they have paid on time. I do notice they are a bit of a hassle, asking to have plastic sheeting put over windows in the winter, and other small little issues like that.
When property manager called me I told him I put that plastic stuff on my windows in the winter as well, but that as an adult and a homeowner that's something you take upon yourself to do, not something you expect someone else to do for you. This is my first experience with section 8 but I definitely feel like at least with my tenants there's a sense of entitlement and an attitude that normal things are my responsibility. Recently they wanted a screen door put on the door leading into the garage, not something that is necessary or something that has ever been there. Just little things like that.
Tenants have everything to do with how good the section 8 experience goes. I have seen neighborhoods destroyed by section 8. Be aware of single moms with kids. They want their boyfriends to move in then his kids then she has another baby. Next thing you know you have 10 people using the appliances and toilet and wearing your apartment out.
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