What the lowest credit score I should accept?
Thanks Jag.
I start getting nervous when it’s below 600. I’m not sure I have a minimum. I had an applicant with a 430 or 480 (not sure which, don’t remember) and I was going to accept them provided they give 6 months rent as security. I don’t think I’d turn people down based on score alone, but I’d hedge my bets.
For that particular couple, they had reposessed cars, unpaid medical bills, EVICTIONS, etc. I told them I can help them build their credit because I’m going to report their payments to the bureau each month provided they:
- Pay first and last month’s rent up front.
- Pay a full month’s rent security deposit.
- $300 per pet deposit (they had 2 dogs).
- Provide 6 months rent as an additional refundable deposit in addition to regular monthly payments.
They declined, so oh well. 
Dee, can you explain how to go about reporting to the credit bureaus?
I don’t use credit scores.
Got people living at home with mom moving in with a girl friend, setting up house for the first time. Guess what is credit score is, would be in the high 700’s.
Why??
The guys’s got free rent, mom’s cooking, and splurges on a car, that he’s readily able to pay. Credit scores only indicate past performance.
Then, when he decides to play house, I see he’s barely able to make his credit card and car payments with the rent and utilities.
Bottomline.
I do an analyss of his monthly payments, to see his can cover the bills first. Do I look at credit scores??
I started in the business long before credit scores came about, so I read through the credit report to get the general picture. Recent bankruptcies, and slow payments would disqualify most. I made exceptions.
I rented to THREE tenants through the years that were was bankrupt previously.
- One was a perfect tenant, I can go in any time to do repairs, rents on time for seven years. He guaranteed a oan for his son’s business that went bankrupt, not his fault.
- One guy skipped out on the last three months rent, but I had 1-1/2 month security, He was a cop. I rented to three cops thru the years, and one other took my carpeting when he left. The third one had a dispute with a roommate, paid rent for an empty apartment for 11 months. Should I have a rule renting to cops??
- One went on drugs, his dad fired him, owed me over $6,000 in rent. But he worked off $2,000 of it, and paid me back the rest in $50.00/week money orders two years later when he sobered up.
Conclusion.
I use my common sense, and even with prior bankrupt tenants, I lost 1-1/2 month rent in 25 years.
If you need rules, I would go with 600 and above, but you might have problems in some poorer areas.
What I do is I base my conclusions on how he talks, fill out an application, stabilty etc. Even losing 1-1/2 months rent, I believe I’m on the money most of the time.
I have accepted a 530 score and she is my best renter so far. Always sends checks days in advance and takes care of the place better than I would. I did call her previous landlord and confirm she was a good tenant beforehand though.
If you only took people with great credit you wouldn’t have any tenants, after all if they had perfect credit they would be buying not renting. I think the most important think to see is their most recent history and to see if their problems were in the past or are currently a problem that may cause them to not pay their rent.
The online rent payment services will report the on-time (or late) payments automatically to the credit bureaus. http://nail-usa.com/automatic.htm
I agree with Frank Chin. I just had two people want one of my houses this weekend. Both had decent credit scores both had problem with houses they were going to lose. One had been 90 days late on their mortgage 4 times in the last 2 years. The other had never been late on his house but had been late on his car. I want someone that will pay for where they live first. When I look at the reason each wanted to leave a house it was clear that the one with the late house payments had a lot less reason than the one with the on time payments.
By the way, I sold him the house that I paid $101k for and I have about $115k all told in the house. I sold it to him for $155k. I am owner financing it with $5k down and he will pay me for 24 months at $1550/month and my PITI will be $1036/month. Less costs for setting up the trust I get $4.5k up front over $500/month positive cash flow and if he converts at the end I get about $40k. I like this deal all the way around. I just had to brag!