Credit Utilization Percentage

[George M.]

I'm a novice when it comes to being a landlord. I've taken on the responsibility of self-managing a couple of rental properties I own, previously relying on a property management firm for this task. This time, I decided to take matters into my own hands, given that I only have a few properties and wanted to learn the ropes through hands-on experience.

Now, I have a question. I've received numerous rental applications from individuals who seem to meet my minimum requirements, but they exhibit a high level of credit utilization, reaching as high as 80%, 90%, and even exceeding 100%. While they haven't missed any payments or become delinquent, my instincts tell me they might be on the edge financially, one mishap away from being unable to pay their rent. Is there a specific percentage or threshold that landlords typically use to assess tenants, ensuring it doesn't raise a red flag?

[Josh Young]

@George M. the utilization percentage doesn’t necessarily tell you enough. Some people might only have one credit card with a low limit and that could make their utilization percentage high. You need to look at the whole picture and compare the amount of debt and monthly payments relative to their income. Think about it like an underwriter calculating the debt to income ratio.