does a big Deposit make up for a not so good credit score?

Question

Found a nice couple who wanna move in there landlord reference checked out and good job. Not so good credit scores and declined them for credit scores on transunion smart move. But we gave option for a $7,500 deposit and the gentle is good with that to put down as a deposit. Is that sufficient?

Kenneth Garrett · Answer

@Joshua D.

Below is the security deposit law for your state.  Two months maximum for a one year lease.  Hope this helps.

Pennsylvania Security Deposit Laws

The following table is a quick summary of Pennsylvania's security deposit laws.

Code Sections

68 P.S. §§ 250.511a-250.512

Security Deposit Minimum

There is no minimum.

Security Deposit Maximum

The maximum a landlord can require for a security deposit is two months' rent. For any subsequent years of renting, the landlord can't require more than one month's rent.

What Can a Landlord Deduct?

The landlord can deduct for damages to the premises. The landlord can also withhold the security deposit for unpaid rent and/or breach of the rental agreement.

How Long for Return of Security Deposit?

The landlord must return the security deposit within 30 days of the tenant moving out. If the landlord keeps any of the security deposit, he or she must provide the tenant with a written list of damages and the remaining balance within the same 30 day time period.

Remedy for Violation

If a landlord fails to comply with these statutes, the tenant is entitled to double the security deposit and any interest earned in the escrow account. However, if the tenant fails to provide the landlord (in writing) with his or her new address, the landlord will be free from liability.

Michael Ablan · Answer

@Joshua D.  I'm usually very lenient on credit score.  Bad credit scores is normally why people are renters in our area.  If everything checks out and they don't have a bunch of open past due accounts on their report, then I'll usually make the exception.   A very large deposit definitely makes the decision much easier too

Lori Greene · Answer

I agree that credit score is important but not always the only criteria for decision. Did you also do a background screening? And see if you can get a peek inside their car to see if it's a disaster, or if you know where they live now, drive by and see if the yard is full of junk. And check references, especially from their previous landlord if you can.

Also, did you look at their full credit report. Sometimes a score doesn't reflect the overall picture without there details. Do like a bank and ask for explanations on each of the credit issues. If it looks like a bunch of excuses, think twice. If it's maybe a big medical bill and a few little mistakes but all explainable then give them a chance.

If all of those things check out plus a big deposit, then go with your gut.

Josue Vargas · Answer

Can they explain why they don't have good credit score?  There are some good and logical reasons for having a bad credit score, and this may not necessarily reflect on them as person that does not take care of paying on time or have the ability to do so.  Act with caution.

Contrary of someone suggestion, I would not accept rent in advance, PERIOD.  Accepting rent in advance only give you little room for evicting them if they are not performing within the Lease, or at least some more trouble to have them out of your property down the road if needed.

Is kind of weird they have $7,500 for deposit, plus one month's rent before they even move in.  How much is the rent? I usually skip them if they don't meet up criteria, but if they are very interested and all things checked up good, I would do what your state laws allowed for deposit, plus a one time FEE (non-refundable) of one month's rent.

Maybe an alternative to lease for min. 6 month, and if they don't continue with the lease for a full year, you can keep a portion of their deposit for costs associated to advertising etc.

Matt K. · Answer

Good with that doesn't equal funds be it cash or cert check.

Median home price in Pittsburgh is like 145k, I bet rents probably around 1200...

Second, no one wants to rent this place... Or maybe I should say no one qualified wants this place...reason why this couple is being considered. So one has to wonder why would someone with 7,500 want this place that no one else does?

Alex Smith · Answer

I wouldn't recommend it. Their credit score is low for a reason. It's ultimately up to you though. Credit scores are often a direct correlation to someone's ability to pay bills (rent) on time.

Charles Long · Answer

@Joshua D. My 2 cents... Potential tenants should be evaluated on 6 factors 1. Job time/stability 2. Rental History 3. Income 4. Credit 5. Criminal History 6. Pets

If any one of these factors is less than ideal (in this case credit) but everything else looks good then that should be ok.

If 2 or more of these criteria are less than ideal...RUN

Also, someone willing to pay $7500 deposit is a red flag for me. Sounds like a desperate tenant. Of course I dont know what the monthly rent amount is but in these types of cases we typically go with 2 months rent for deposit and possibly first and last.

I dont recommend accepting the $7500 as advanced rent... They have to pay rent anyway. Keep it as a safety net for yourself to make up for the added risk you are taking on with a less than stellar credit score.

Good Luck!!

Nathan Gesner · Answer

Credit score is very important. Every lender in the country uses it for cars, houses, boats, lines of credit, etc. Why? Because it is the single most reliable indicator of one's ability to repay debt, period. If you are ignoring credit then you are not making the best decision.

Your state appears to limit deposits to no more than 2x rent. Some states also limit charging or accepting rent in advance. It's important to know the law and tailor your policies to that.

I use an objective score sheet for my applicants and they get a score of 0 - 30 with 30 being the highest. The lower the score, the more deposit I charge. If the score is below 16, they fail and I won't rent to them. It works well. With over 300 rentals under management, my last eviction was 4.5 years ago and I send about 0.5% of my tenants to collections because the deposit didn't cover what they owed after vacating.

Kyle Godbout · Answer

just like previously mentioned a few times, make sure you know your states laws. In Nebraska you can only charge one months rent for security deposit. If you can legally take that much, and everything else checks out ok, I would consider it.

Peter LaBreck · Answer

@Alex Smith

Although I agree there very well may be more to the score, I myself have a 660 score due to hard inquiries from multiple purchases (real estate) over an 8 month period while sustaining a low DTI ratio. There is always more to a score than the actual number. Not to bash the post Alex, I just get frustrated when my score or inquiries are judged compared to my perfect payments over a long period and great credit utilization. As far as tenants go they deserve a further evaluation. One must get a start somewhere

does a big Deposit make up for a not so good credit score?

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