Tenant screening with SmartMove, good credit score but bad debt?

General Landlording & Rental Properties
10yFollow

Tenant screening with SmartMove, good credit score but bad debt?

Cooper B.
Real Estate Agent · Birmingham, AL · Member since 2012 · 73 posts · 11 votes

I don't have much experience with tenant screening but I came across something today that I can't figure out.

I pulled a credit report from TransUnion / SmartMove on a potential tenant.  They recommend that I accept the tenant, and give a "Resident Score" of 789. This is the first time I have used this service so I don't really know what the "Resident Score" means.  Is it supposed to be similar to a FICO score?

What is confusing me is that in early 2014 there were 2 credit card accounts that were closed and charged off as bad debt with balances of over $25k.  There is also a mortgage showing up that was closed in early 2015; under remarks it states "Settled - less than full balance".  

I asked the potential tenants about the credit cards and he stated that he had a major medical issue 2 years ago and told the credit card issuer that he couldn't make payments, then he never heard anything else about it and didn't ever receive any more bills.

To me this seems like some pretty significant red flags, yet the automated recommendation is suggesting that I should accept the tenant.  There are a number of other accounts in good standing, but those charge offs were just last year.  

Anyone out there have any experience with the SmartMove service that could give me any advice here?

0Reply
279 views

Most Popular Reply

Jacob Blackett
Specialist · Columbus, OH · Member since 2012 · 176 posts · 98 votes
10y

Hey Cooper! I haven't used SmartMove, but my screening service also gives automated recommendations. In general, I stick to the main factors:

1. Rent history- good reference, would previous landlord rent to them again, no evictions in the past 5 years, etc. 

2. Job history & income requirement- are they clearing 3x the monthly rent in take home pay minimum? what other monthly expenses do they have? 

3. Credit score- like you stated there are red flags here. Per your description of this applicant, if 1 & 2 above is not STRONG, then I'm moving on and getting more tenant options. If the individual has had some credit issues, but can prove to me they have gotten it together the most recent 12 to 24 mos e.g. can show me payment history on their current CC's, bills, etc, then there's some possible consideration, assuming 1 and 2 above are strong also. 

So in summary, I use the automated software only as a guide- the tenant approval process can be a complicated one sometimes- the more complicated it gets, the more you should be thinking about getting more options. 

Best- Jake 

2Reply
See this reply in the discussion

56 Replies

Jump to latestLatest
  • Jacob Blackett
    Specialist · Columbus, OH · Member since 2012 · 176 posts · 98 votes
    10y

    Hey Cooper! I haven't used SmartMove, but my screening service also gives automated recommendations. In general, I stick to the main factors:

    1. Rent history- good reference, would previous landlord rent to them again, no evictions in the past 5 years, etc. 

    2. Job history & income requirement- are they clearing 3x the monthly rent in take home pay minimum? what other monthly expenses do they have? 

    3. Credit score- like you stated there are red flags here. Per your description of this applicant, if 1 & 2 above is not STRONG, then I'm moving on and getting more tenant options. If the individual has had some credit issues, but can prove to me they have gotten it together the most recent 12 to 24 mos e.g. can show me payment history on their current CC's, bills, etc, then there's some possible consideration, assuming 1 and 2 above are strong also. 

    So in summary, I use the automated software only as a guide- the tenant approval process can be a complicated one sometimes- the more complicated it gets, the more you should be thinking about getting more options. 

    Best- Jake 

    2Reply
  • Account Closed
    San Jose, CA · Member since 2015 · 4k+ posts · 3k+ votes
    10y

    Hi Cooper, I also wouldn't take this tenant.  I think it's weird this program recommended this person as a great risk

    Medical debts can be more forgive-able, but my problem with this tenant is that they could still file bankruptcy and include any debt to you in that BK.

    Personally, I'd rather take a freshly discharged Chapter 7 BK over someone with a couple of 25K bad debts.  All they have to do is file BK and include any rent they owed to you, too.

    At any rate, unless you can't find someone better, I'd keep looking.  And I don't think I'd use that service anymore LOL.  Just run credit checks on all applicants and make your own decisions, since that is what is looks like you'd be smart to do anyway.

    1Reply
  • Jerry Bruckenheimer
    Investor · Harker Heights, TX · Member since 2015 · 76 posts · 34 votes
    10y

    Use a different service that provides a real Fico score and you'll quickly see this tenants "score" is in no way similar to a Fico score. With those derogs and being that fresh, sub-600 Fico for sure.

    0Reply
  • Alex Hamilton
    Roseville, CA · Member since 2015 · 57 posts · 26 votes
    10y

    Does SmartMove offer Customer Service for questions like this? 

    0Reply
  • Jeff B.
    Buy & Hold Owner · Redlands, CA · Member since 2015 · 5k+ posts · 2k+ votes
    10y

    I use Trans Union and Experian and I'll share my thoughts.

    Life gets messy and we can see it in the CR reports.

    Fico is interesting but is not as they say 'a leading indicator', it trails reality.

    Prior settlements, BKs and write-offs, 2-3 yrs back, ignore'm

    What happened prior  years may establish concerns, but to me the 30,60,90 days  past due are my primary focus; this is the applicants 'current life' - - how much of it do I want?

    What kinds of accounts are in trouble?  Internet or Cellphone accounts?  People LIVE on these thinks and past due is really unacceptable.

    0Reply
  • David Dachtera
    Rental Property Investor · Rockford, IL · Member since 2014 · 4k+ posts · 2k+ votes
    10y

    As you have no doubt discovered by now, a credit or other score by itself is virtually useless without seeing the underlying credit report.

    Even then, some things can still be confusing.

    For example: credit card accounts being charged off may suggest a recent bankruptcy. A home loan being closed as "Settled - less than full balance" may suggest a possible short sale or recent bankruptcy where the home was not reaffirmed.

    A surprisingly large proportion of bankruptcies are reported inaccurately. ALL information on a credit report MUST be accurate or, by law, it MUST be removed (reference: The Fair Credit Reporting Act (FCRA)). So, it's possible to see evidence of a bankruptcy without the actual bankruptcy appearing in the report if it was removed as inaccurate and not re-reported correctly.

    Credit scores usually only consider open accounts. If the open accounts are current with no delinquency, the absence of a bankruptcy will prevent the score taking a hit.

    Scores do not tell the whole story - they never have, nor were they intended to. When evaluating credit / rental worthiness the ENTIRE credit report must be considered.

    0Reply
  • Account Closed
    Professional · Woodinville, WA · Member since 2015 · 1 post · 0 votes
    10y

    Even with good credit, the charge off's raise a flag to me too.  I use a company to report rental payment history to the credit bureaus.  Therefore,  anyone planning on not paying rent on time, will show up on their credit report when they go apartment hunting the next time around.  Its funny how fast they want to clear things up when its on their credit report. I always say, the person who WANTS their payment history reported on a monthly basis to improve their FICO score is  the tenant you want.

    0Reply
  • Jerry Bruckenheimer
    Investor · Harker Heights, TX · Member since 2015 · 76 posts · 34 votes
    10y

    Fico scores factor both open and closed accounts and the age of your credit file (AAoA) is 15% of your Fico score.

    0Reply
  • Jeff Gates
    Investor · Cathedral City, CA · Member since 2014 · 481 posts · 170 votes
    10y

    Credit score means so little. 

    I talk with the past landlord and ask:

    A rental applicant who looks great on paper isn’t necessarily risk-free. The best way to avoid potentially troublesome renters is by requesting a reference check from their previous landlords. A renter who is coming up on the end of a lease and desperately trying to find a new place may not have any qualms about being dishonest when answering your screening questions.

    1. Was the rent paid on time and in full?
    2. Did the tenant take good care of the home or property?
    3. Did the tenant display disruptive behavior?
    4. What was the rent amount?
    5. What was the deposit amount?
    6. What was the deposit amount that was refunded?
    7. Did the renter bring in other people during the lease? Where they on the lease?
    8. What was the condition of the property upon their lease end?
    9. Did you give notice to vacant or any other non compliance issue?
    10. Was the renter a good communicator?
    11. Did they fulfill the lease term?
    12. Did the renter abide by the Pet policy?
    13. Would you rent to this person again?
    1Reply
  • Ronald PerichPro Member
    Investor · Granite City, IL · Member since 2014 · 658 posts · 301 votes
    10y

    @Account Closed, what company do you use?

    0Reply
  • David Dachtera
    Rental Property Investor · Rockford, IL · Member since 2014 · 4k+ posts · 2k+ votes
    10y
    Originally posted by @Jerry Bruckenheimer:

    Fico scores factor both open and closed accounts and the age of your credit file (AAoA) is 15% of your Fico score.

    My credit expert is an expert witness and consultant to legislators. He would disagree with you about closed accounts. 

    0Reply
  • Jerry Bruckenheimer
    Investor · Harker Heights, TX · Member since 2015 · 76 posts · 34 votes
    10y
    Originally posted by @David Dachtera:
    Originally posted by @Jerry Bruckenheimer:

    Fico scores factor both open and closed accounts and the age of your credit file (AAoA) is 15% of your Fico score.

    My credit expert is an expert witness and consultant to legislators. He would disagree with you about closed accounts. 

     You need a new expert.

    2Reply
  • David Dachtera
    Rental Property Investor · Rockford, IL · Member since 2014 · 4k+ posts · 2k+ votes
    10y
    Originally posted by @Jerry Bruckenheimer:
    Originally posted by @David Dachtera:
    Originally posted by @Jerry Bruckenheimer:

    Fico scores factor both open and closed accounts and the age of your credit file (AAoA) is 15% of your Fico score.

    My credit expert is an expert witness and consultant to legislators. He would disagree with you about closed accounts. 

     You need a new expert.

    I was actually going to suggest that to you. Find someone like my guy who can actually show you how FICo REALLY calculates scores (he's one of about five non-FICo people who can). 

    You might also ask your "expert" how many credit scores you have...

    ...and, for the record, Average Age of Accounts considers only OPEN accounts. Ask your credit guy why closing accounts LOWERS your score (multiple reasons).

    0Reply
  • Jerry Bruckenheimer
    Investor · Harker Heights, TX · Member since 2015 · 76 posts · 34 votes
    10y
    Originally posted by @David Dachtera:
    Originally posted by @Jerry Bruckenheimer:
    Originally posted by @David Dachtera:
    Originally posted by @Jerry Bruckenheimer:

    Fico scores factor both open and closed accounts and the age of your credit file (AAoA) is 15% of your Fico score.

    My credit expert is an expert witness and consultant to legislators. He would disagree with you about closed accounts. 

     You need a new expert.

    I was actually going to suggest that to you. Find someone like my guy who can actually show you how FICo REALLY calculates scores (he's one of about five non-FICo people who can). 

    You might also ask your "expert" how many credit scores you have...

    ...and, for the record, Average Age of Accounts considers only OPEN accounts. Ask your credit guy why closing accounts LOWERS your score (multiple reasons).

     Ok, good luck to you. You are correct.

    For anyone who'd like the real answer to that question: closing accounts will not lower your score until 10 years later when that account falls off your credit report. If your FICO (clarify and emphasize) FICO score drops when you close an account it is because you've lowered your available credit and increased your utilization ratio.

    0Reply
  • Jerry Bruckenheimer
    Investor · Harker Heights, TX · Member since 2015 · 76 posts · 34 votes
    10y

    and can't leave that one hanging...someone is quoting credit karma or another brand of Fako score where it's true only open accounts are factored in AAoA

    0Reply
  • David Dachtera
    Rental Property Investor · Rockford, IL · Member since 2014 · 4k+ posts · 2k+ votes
    10y
    Originally posted by @Jerry Bruckenheimer:

    and can't leave that one hanging...someone is quoting credit karma or another brand of Fako score where it's true only open accounts are factored in AAoA

    Wrong and wrong. My expert quotes only case law (the law as interpreted by the courts) and the Congressional record (the law as written), and information obtained directly from the entities in question (FICo, Experian, etc.).

    When you close your oldest account, your average age of credit will change, sometimes radically. Now, you may have not only a higher utilization but a lower Average Age of Accounts.

    Example:
    Start with three open accounts: one 10 years old, one 3 years old, and one 1 year old. What's your average age of accounts? You should have said 14 years total age / 3 accounts or 4.67 years. Close your oldest account. What is your new average age of accounts? If you said anything other than 4 years total age / 2 accounts = 2 years, you're wrong. Your average age of accounts was just cut in half (50%). The age of your credit file, however, remains the same.

    Please consult your "expert" or check with FICo directly before you embarrass yourself any further.

    0Reply
  • Jerry Bruckenheimer
    Investor · Harker Heights, TX · Member since 2015 · 76 posts · 34 votes
    10y

    please do have the integrity to post back here when you learn what I've posted is correct.

    Good night.

    0Reply
  • David Dachtera
    Rental Property Investor · Rockford, IL · Member since 2014 · 4k+ posts · 2k+ votes
    10y
    Originally posted by @Jerry Bruckenheimer:

    Fico scores factor both open and closed accounts and the age of your credit file (AAoA) is 15% of your Fico score.

    No, they don't. Repeating it won't make it so. 

    0Reply
  • David Dachtera
    Rental Property Investor · Rockford, IL · Member since 2014 · 4k+ posts · 2k+ votes
    10y
    Originally posted by @Jerry Bruckenheimer:

    please do have the integrity to post back here when you learn what I've posted is correct.

    Good night.

    I trust you will take your own suggestion...

    Take care - be well!

    Much Success! 

    0Reply
  • Bill Hamilton
    Denver, CO · Member since 2015 · 251 posts · 123 votes
    10y

    Sorry David, but in this case you and your expert are emphatically wrong. And what is reported to Congress or in case law only has a small bearing on how FICO scores actually function. FICO uses a proprietary formula to determine their scores. They don't reveal anything but the basics to anybody. And I mean anybody. I worked in the mortgage industry for many years and reviewed thousands and thousands of credit reports and have watched what impacts credit scores and how much. I guarantee that closed accounts are included in the score. No question, no room for rebuttal. If someone is telling you anything different, they are either lying or not very knowledgeable in this area. If you are in doubt, reach out to someone who has an open account that just went into being 60 days late a few months ago. Have them close the account and see what happens. Basically nothing. As it ages the negative impact will be less every month. But there is no way that closing that account pops their score back to "good". 

    There are many variances to all of these things. Paying off an old collection account can hurt your score. New changes to FICO (look up FICO 9) will lessen the impact of medical collections on your score. The new FICO will also ignore paid collections. This may be what you are hearing from your expert. The thing is, none of this is currently true. And the banks who buy FICO scores have the choice if they want to use FICO 9 or stick with older scoring models. It's getting late and this is too large of a topic for me to want to try and explain at this point. I hope you won't take all this wrong but I think your expert is dealing with the legislative side of things but that doesn't mean it is filtering to the reality side of how FICO actually does business. And I have no doubt that if you want you can poke holes in some of what I am saying. But seriously, I bet I have seen the real world side of how FICO scores work and change over time by 100 fold, than your expert has ever looked at. That is not a ding at what he does. We are simply functioning in different realms. 

    1Reply
  • Andrea Collatz
    Englewood, CO · Member since 2014 · 101 posts · 44 votes
    10y

    Hi Cooper B,

    I'm a representative with TransUnion SmartMove. If you send me a note through BiggerPockets I'll be happy to look into this application directly. Thanks!

    0Reply
  • David Dachtera
    Rental Property Investor · Rockford, IL · Member since 2014 · 4k+ posts · 2k+ votes
    10y

    Sorry, @Bill Hamilton, but my expert is emphatically and inarguably right, as established by multiple courts in numerous proceedings.

    I guess that's why he's called as an expert witness in credit-related litigation. Judges, attorneys and legislators confer with HIM because he IS an insider and privy to information only a handful of people get to see.

    When someone comes along with better credentials (is that even possible?), I'll compare the two and see if my faith is properly placed.

    I recommend EVERYONE do the same.

    ...and yes - he has explained the newer FICo models - old hat to me and my investment group.

    Your example of the late payment account may be invalid because payment history takes both open and closed accounts into consideration, as I understand it. I'll check with my expert on that to make sure I understand it correctly. Where there are no delinquencies, however, that point is moot.

    Payment history and Average Age of Accounts are two separate factors, and payment history carries more weight in the calculation than the average age.

    However, the Average Age of Accounts -WILL- be impacted by the closure, either way: delinquency or not. As you said, "No question, no room for rebuttal" on that.

    Likewise, percent utilization takes only open accounts into consideration. "No question, no room for rebuttal" on that.

    For those two reasons, the result of the score calculation -WILL- be impacted by the account closure. "No question, no room for rebuttal" on that.

    Sorry...

    0Reply
  • David Dachtera
    Rental Property Investor · Rockford, IL · Member since 2014 · 4k+ posts · 2k+ votes
    10y

    Credit Question for anyone who wants to take it on...

    How many Credit Scores do you have?

    0Reply
  • Jerry Bruckenheimer
    Investor · Harker Heights, TX · Member since 2015 · 76 posts · 34 votes
    10y
    Originally posted by @David Dachtera:

    Credit Question for anyone who wants to take it on...

    How many Credit Scores do you have?

     The only two that matter to lenders... Fico 04 and Fico 08. All other scores are wasted time and effort to contemplate. Other than outliers like Penfed that use NextGen or lenders that use auto-enhanced or bank card-enhanced the other variants are academia and trivial pursuit questions.

    0Reply
  • Jerry Bruckenheimer
    Investor · Harker Heights, TX · Member since 2015 · 76 posts · 34 votes
    10y

    Anyone who'd like to confirm for themselves that Fico utilizes open and closed accounts to calculate AAoA go here and purchase this product http://www.myfico.com/Products/FICO-Ultimate-3B/ You will be given an AAoA result along with your scores.

    Then use this calculator to do your own verification http://seemly.com/aaoa-calculator/

    0Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free