Credit Scores

[Bob Norris]

We all have been instructed to set a criteria for the renters we want to attract and are willing to rent to.  Brandon's book on managing rentals is a great primer and guide on the subject.  I have read articles on what credit scores to accept, i.e., 600+, 700+, etc.  What I don't have a good handle on is how to set my company's acceptance standard and what specific scores mean.  How credit worthy is someone with a 615 score as compared to a 675, for instance.  

What number do you use, why, what does it mean, and what type of renters do you get in exchange for your score?  

Thanks,

Bob

[Thomas S.]

I use 650 but the credit score itself is only a small portion of the information you cleen from a report. It tells you what their available credit limit is and how much of it they are using as well as their payment history, 30, 60, 90 day late. It will also tell you who their creditors are.

Plenty of valuable information to make an analysis beyond the score.

As for the scores they indicate the probably of default based on tens om millions of case histories. For the sake of your risk tolerance you should know the probability of being paid. 

Delinquency rates based on credit scores:   800+.........1%

                                                                       750-799... 2%

                                                                       700-749....5%

                                                                       650-699...12%

                                                                       600-649... 23%

                                                                       550-599... 39%

                                                                       500-549... 60%

                                                                     up to 499... 78%  

The majority of my renters are above 750 and I have never had any issues with a tenant having a high score. The lower the score the more training I am forced to do to insure my tenants do not cause any issues but my screening is far more extensive than simply the credit score.

I do the personal background as well as a personal interview usually taking a minimum of a hour to analyse attitude, beliefs (non religious), authority issues, etc. etc.

Nut jobs, sociopaths, and all other mental illnesses a person may have generally result in lower scores but not always. It is very important when screening to learn to read personalities. If they are too sweet or giving, making all sorts of positive comments and promises, called overlay, eliminate them immediately. They are all liars.

In also automatically eliminated anyone on welfare or government disability, they all have deplorable scores and I have learned a terrible attitude toward authority.