HELP - How do you know who to rent to?

Question

Hi,

I'm doing my first rental property.  I've have an application that I ran through SmartMove.  It says to "ACCEPT".  When I look at the details, this particular person is making over 100K a year in high tech contract work.  He works for 6 months to a year and then has to get a new contract.  Rent is about $1200.   Renter pays utilities which is probably another $200.   I'm checking references now and calling past jobs (or rather faxing past jobs for verification).  Does anyone have a good job reference letter they want to share?   I'm also calling past landlords.  He does have a letter from current landlord that says he has a good payment history (about 12 months).   Currently landlord is selling so he has to move.

They're a 60+ couple with an older son living with them.

While paying for his car, he had 17 - "30-day past due notices" between 2008 and 2012.  No 60-day past dues.  He has about 600 for a credit score.   He also has a maxed out credit card with a $6,000 limit.  No past dues on the credit card account.   He has a cell phone bill that was sent to collections for $300 this year.

Per SmartMove,  Reason:  An analysis of the credit history for this applicant indicates they meet the credit requirements you've set for this property. No additional conditions should be necessary other than your standard deposit.

Assuming the other work and landlord verifications come in good, would you rent to this person?  Why or why not?

Thanks,

Craig

Alexander Felice · Answer

Tenant screening is important, but it doesn't determine what will happen for the next year, that will be based on how you treat the tenant throughout that time.

Sit this guy down and talk to him, face-to-face, and get a feel for how you communicate together. Tenants are people, not a credit score. No one's credit score can tell you their story, teach you their body language, it can't tell you when they lie, their motives, their intentions, or their ambitions.

I can tell you are unsure just by the way you describe this applicant. No amount of data will be able to fix that, you need to get a 'warm and fuzzy' from the person directly, THEN, you need to constantly manage them. It's not a robot, just because he has good income or good credit doesn't mean the lease will go perfectly.

JD Martin · Answer

What it sounds like to me are people who make plenty of money to pay the bills but suck at managing said money, or someone who doesn't make as much as suggested - i.e., if he makes $100k/annual on a contract but only works 6 months, and it takes him 6 months to start another contract, he makes $50k/annual.

Based on his credit history I would probably reject.

Al Williamson · Answer

Hmm, there are lots of indicators suggesting they are financially stressed.

Moreover, you sound apprehensive - and I want you to trust your gut.

Reject based on a low credit score and wait for another applicant.

Craig Stephens · Answer

Thanks for the advice.  Most of my "feelings" on this one are based on being a first time, and not having gotten answers that I needed.  I spoke to @SJackson to understand the report and was able to clarify what I was seeing on the credit report..  I just called and talked to the past landlords   His previous landlord offered them another rental house but it's outside where they want to live.  He'd love to have them back as renters.   They've always been on time for the rent.  I called and talked to previous jobs.  He has an outstanding recommendation there.  He does do contract work -- which is a risk.  But he's highly paid so that's good.  So just going with the hard facts.  I'll talk to them again when I review the lease and make sure they can pay the rent and deposits.   Account Closed I did do the credit check and the late payments check -- all clean.   I do appreciate all the feedback!

Account Closed · Answer

@Craig Stephens Congratulations on your first rental. You mention using landlord and work verifications in addition to the credit report. I would also suggest making sure that the criminal background check comes back clean, since the screening recommendation states that it is only based on credit.

Thomas S. · Answer

With a low credit score and default credit reports this is a no brainer. Unless  this is the only applicant you expect to see throw his application in the garbage. You are not a personal financial advisor or a psychologist so don't take a risk thinking you will somehow magically turn this guy around.

Also unless you are buying a bunny rabbit for your kids leave the feelings at home when making  business decisions. Cold hard facts and background information is all that's needed to make decisions, unless your a social worker, your not a social worker are you ?

Also raise your standards, a 600 score is near bottom of the barrel, 30% delinquency rate. He will not pay rent on time when other bills get in the way. Don't believe his present landlord that guy is probably glad to be getting rid of them.

Alex Hamilton · Answer

Yes, you should rent to this applicant if their verifications come in good.

Alternatively, you should change your credit requirements set for the property. Don't base your approval decisions on the feeling you get, that's how you get sued for discrimination.  Talk to your CRA or a tenant screening professional that can advise you on FCRA and Fair Housing regulations.

Good luck!

HELP - How do you know who to rent to?

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