Screening criteria & credit

[Shawn Thom]

I am trying to do my own screening/renting on my next rental. I have heard a lot of people say they do not look too closely at credit, but I wanted to get some opinions from others.

Do you look closely at credit? Since most renters do NOT have great credit I was wondering if it was even worth it.

How far do you go? Ignore collections? How about a car repo? or utilities? how about cell phones?

These are for mid range homes in DFW area with ARV $70-$90k and rent $900-$1000.

[Steve Babiak]

@Shawn Thom - when evaluating applicants for a rental, you look at the credit report more importantly than looking at just a credit score; OTOH, banks look at credit score and won't give a loan without sufficiently high score.

@Kevin Perk already pointed out that you can get their total monthly debt obligation from the credit report, to help in determining affordability and debt to income ratios.

The only collections you might choose to ignore are for medical procedures and maybe student loans. They probably had to go to the doctor or hospital whether they could afford to pay or not. As for student loans, they probably aren't getting any more of those if they're not paying off the ones they already owe.

Cell phone - they need that almost like a utility like water or electricity. You definitely don't want anybody who can't pay utilities if you require the tenants to pay utilities. A car repo might be OK, depending on how recent and whether they have alternative transportation to get to work.

Another thing I look at is the trend in their credit report. Are they getting better at paying for things or is it getting worse? Obviously, you don't want the latter. the more months going back that show improvement, the better their chances are of staying on track for paying their obligations.

One other thing that is in the full credit (and probably missing from the pass/fail reports) is address history. You want to go through the address history and contact the landlords that are in that history, to see whether this applicant was somebody's former problem tenant. so you will definitely need an authorization or release of some sort that permits you to talk to any former landlord (and not just ones that the applicant lists for you).