Renting to people with bad credit?
For those of you who own and rent out properties, have you ever worked with someone who has bad credit? It seems to be a very common issue today and it seems like most people with average to below average credit scores struggle to find homes to rent in decent areas because most property managers don’t want to risk anything.
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I don't deal with renting but I can tell you that I would never want to rent out to someone with bad credit. I have heard some bad stories from landlords having to deal with months without getting rent as well as having to force families out using law.
The advantage individual landlords have over big management companies is that we can be more flexible with our terms than they can. We can and often do treat each tenant on an individual basis, not just by what some numbers on a credit report show. Of course, a credit score that you can get through Cozy is a great indicator of whether a person is a good or a bad credit risk. A low score, usually 629 and below, often means this person doesn’t pay their bills, or if they do, they don’t pay them on time. A low score could also mean a person carries too much debt, and if that happens with one of your tenants, good luck getting rent payments. So basing your decision on a person’s credit score makes sense.
When deciding if an applicant is worth renting to, the old adage, past behavior is the best predictor of future behavior, certainly applies. However, responsible people, and more importantly, good tenants, can make financial blunders and bruise their credit. In fact, nearly 70% of Americans admitted to making a substantial financial error resulting in low credit before the age of 30. Therefore, the first and most important step is to discuss the problem with the applicant. What makes this applicant makes risky? Perhaps their credit score is low, or maybe they have high credit card debt. Finding out what the applicant has to say about the issue is a good way to determine if you should approve their rental application.
Ask a real estate agent in your area to find you an apartment to rent. Many homeowners, especially those who live outside the area, use real estate agents to rent their homes and will pay the agent a commission on your rental. Once you've contacted a property owner, ask them what criteria they use to approve tenants for the rental. If a credit check isn't one of them, then you have one less thing to worry about. However, if there is a credit check involved, you have some additional options for getting approved.