Potential Tenant 580 Credit Score...Are All Scores Created Equal?

Question

Good day!Wanted to ask the landlord community their take on this matter. Let me preface with the fact that I've been following the BiggerPockets Tenant Screening: The Ultimate Guide throughout this entire process. Ok so here's the deal.on August first, I closed on my first duplex in the Northern, NJ area and I am now in the process of trying to rent out the 2 Bdr Apartment upstairs. I have been searching for just about two weeks and have received over 50 inquiries. Short story shorter, I have a candidate who has provided all the information required and everything looks good except the credit score (580). Ok so "everything looks goods" is a very vague statement, so let me clarify. The candidate's income is 3X the rent, he provided solid references (to include the previous landlord whose had him as a tenant for 6 years), he has a clean background and hasn't have any evictions ever. The problem I am having is the Credit Score, he has a 580 but as we all know all scores are not created equal. A candidate with 20 accounts and a 90% credit utilization rate is different from a candidate with only one account and a 90% credit utilization score. To give some more context, the reason his score was low is because he doesnt really have a ton of credit, he had a payment outstanding for $230 and he seemed to have no knowledge of it when we brought it up. He offered to pay it off and asked us to run his score again once he did so. I'll close with the fact that he has no current or previous delinquencies, literally the only thing bringing him to a 580 is the $230 from a phone bill. if this $230 was absent, he would easily be within the 600-650 range.I would appreciate any input from the landlord community on BiggerPockets. Obviously I am new to the investor world but I do understand how important proper vetting is and I really want to get this right.Thanks!

Daren H. · Answer

Just curious, why was he moving from the prior place? How long has he been at his gig?Also, with 50 inquiries, were you not able to find someone else who met your criteria with a preferable credit score more to your liking? I would also look for a reference from the landlord prior to the most recent.

Johnathan Boyle · Answer

@Miguel Sanchez Okay gotcha. Well, in that case, it all ended well and everything happens for a reason. I mean, I had a tenant who on paper did not look like a good candidate but from her personality and her income, I could not see why she wouldn't be. She literally scored a 0 in the credit check with a 620 credit score and a 4500 a month income. Something did not add up and I went with my gut and let her in. Of course, from all the things that popped up, she admitted to before I did the check and she was actually surprised with a few things and even her past 3 landlords vouched for her so I was confused. I know I am not telling the best story and she seems like a nightmare, but she has been great. She pays on the 1st of the month bright and early in the morning every month for the past 6 months so I can't complain.

Jennifer T. · Answer

I know this has now been resolved. Good luck with the new tenant!But still wanted to add in my two cents.I've had two experiences where my own credit score nose-dived for, imo, no reason considering the rest of my report. One of them was a bogus $100 bill that was turned into collections. I was young and too naive to realize I should just fight it and have it removed, so I didn't bother. I'm currently facing a lower score, just because of my credit card utilization. Long story short, my balances went up while I was doing a reno. Never mind I have 20 years of paying bills on time and have never had an account go into default. And as that utilization started to go up, I had two cards severely hack my credit limit. Which caused my utilization to suddenly get drastically worse. So then two more cards severely hacked my credit limit. Quite frankly, it's a lot of b.s. I understand why my score would go down some. But it dropped from 720 to 590. Totally ridiculous to drop that much, considering there were no missed payments. I would have been back to under a 30% utilization a few months ago, if it hadn't been for the limits being cut so drastically. Instead, it will end up being NINE months before I've recovered and get my score back into the 700s.I personally don't respect how credit scores are calculated, how items are reported, and the total inaccuracy of credit reports. I've read in many places that 1/3 of credit reports have mistakes on them. Yet, this dysfunctional and pathetic tool is the best society has for making important decisions in people's lives? Disgusting.Okay, rant over! But, yeah. I'll definitely look at a credit REPORT to look at things like how many missed payments they have, judgements and/or collections against them, etc. But I could largely care less what someone's score is.Oh! And let's not forget medical bills that go straight to collections without even giving a person a chance to pay it first. Although I've never had that happen to me, I did receive a medical bill for the first time...THREE years after the procedure. So it hardly surprises me that medical bills are a huge reason many people have a low score.

Linda Weygant · Answer

I would accept this tenant. One of the identity theft scams is grabbing people's info to open cell phone accounts to conduct illegal business with. It's possible your prospect is a victim of this since it sounds like he had no clue about it.

Bettina F. · Answer

Ask for a double security deposit if legal in your area.

Melvin List · Answer

@Miguel Sanchez they could probably due an FHA mortgage with that score so if he makes 3x the rent and everything else checks out I would personally let him rent.

Miguel Sanchez · Answer

@Daren H. Darren he had only been at his job for a few months and was leaving his previous unit because he no longer wanted him and his family to live with his mom in law.Fortunately, the turnout was a lot bigger than 49 candidates and I was able to rent to another

Miguel Sanchez · Answer

@Linda Weygant These thieves are creative now a days!

Miguel Sanchez · Answer

@Adam Anderson Thanks Adam! It actually turned out to be a lot more than 49 applicants. I went with another candidate, his choice not mine.

Miguel Sanchez · Answer

@Bettina F. Thanks Bettina. I will keep this in mind for future reference.