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Updated over 5 years ago, 04/17/2019
Do you Run a Credit check; Why Or Why not?
- Credit Checks are a major deciding factor?
- Have you ever had success without running a credit check?
- Great applicant, with poor credit, that’s the only issue, would you take a chance on him?
Always do a credit check no matter. Make the applicant pay for it. 700+ or no deal.
If it is family or a good friend, then don't even rent to them because you can't evict them without ruining your relationship. Run it like a business.
Yes always!
Never accept some with poor credit.
You are asking for problems if you do!
@Cameron Riley something to keep in mind is that just because you run a credit report, doesn't mean you need to screen using a credit score. Two people with 500 credit score can have totally different reasons why. You can see things like when they purchased a car, what the car payment is and how much is owed. There is s difference between having a low credit score due to past behavior and having one due to ongoing behavior. If they are three months behind on a $150 car payment, what are the odds they will pay rent on time? When the car gets repossessed, how likely are they to keep their job?
When I first started in C class properties, I never ran credit reports. My logic was, "I know it will be bad, so why bother." Once I started running credit reports, my tenant payment problems disappeared.
Good luck.
Originally posted by @Cameron Riley:
@Susan Maneck
True! Lol! I never run credit! I work in the urban areas and low income areas of the investment business.
Well, I do want to know if they have ever been evicted or they don't pay child support. People who don't take care of their kids are not likely to take care of my house.
I always run a credit and eviction check. I had applicants that omit evictions, and bankruptcies. If they lie, it's often a disqualifier. But I rented to people that had evictions and bankruptcies in the past, and turn out OK, although some haven't. At least running a check, you know who you're dealing with.
Always ask for a driver's license to confirm identity. I caught a few people where they fill out the application on site, ask for the license, and turned out to be a different name. Once, I had an applicant, said he forgot his driver's license, left it home, on the first visit, bought his proposed roommate on the second visit because I insist on seeing people in person renting from me, and left the license home again. He and his roommate claimed to be brothers, but yet has a different last name on the application. They then explained they are really step brothers. Originally told me it was a cousin. When I ask the step brother for his license, he hemmed and hawed. I said "don't tell me you also forgot yours too." He sheepishly pulled his wallet out, gave me a license that showed me a totally different name. Said he used a different name at work, but couldn't explain why. By now, I didn't know what these guys are up to, I'm alone with them at the apartment late at night, and a little scared. I thought quickly and said "I'm expecting another prospect coming in 10 minutes, so take a quick look before they come."
Guess by now you figured I didn't rent to these guys. What an adventure showing rentals sometimes.
@Cameron Riley
Always run a credit check!
Most of the reasons why have already been covered by others. Here’s an additional reason that I learned the hard way: people that say they have no recent rental references because they’ve owned for a long time. This is not always true....they might know that they have bad references. A credit report will show their mortgages.
@Cameron Riley great question! While some may argue it's not necessary to conduct a credit check on their prospective tenant, I argue that it's a very crucial step of the tenant screening process and that any landlord will find value in the information they receive from such report. Credit reports can help to give you a holistic view of the prospective tenant's payment history as well as any current debts or public records they have, which may foreshadow how likely they are to pay rent on time (aka, how quickly you get a check!). There are many online tenant screening services that make this a quick (and compliant) task. I'd say "yes" to conducting a credit check on your tenant. After all, it's you who is at stake!
Best regards,
Sam
#2 General Landlording & Rental Properties Contributor
"very regional like Mississippi average credit score is 600"
Is it something in the water or the common practice of 1st cousin marriages that effects their abilities.
You're thinking of Arkansas or Appalachia. Cousin marriages are legal in Mississippi, but I've never actually seen one. It has more to do with people not being properly educated in how money works. When I got into investing my dream was that one day my tenants would buy my houses but so far I have never found one who could qualify. People are suspicious of banks and predatory lending is rampant.
Originally posted by @Thomas S.:
I rent B class properties. For me a minimum credit score of 650 is everything, absolutely mandatory. If they are below 650 I don't care why, they are too much risk. They are likely living pay check to pay check or living beyond their means to have not been able to bring it back up. When my applicants are above 650 I then dig deeper into the report to determine if there are other factors that will make them too high risk. If they have maxed out their credit limits they are a no go.
My policy is not only do they have to be able to pay I must also be able to collect when they don't. I want tenants that respect the value of having a high credit score. Most of my tenants are in the high 7s.
Landlords renting C class properties use much different metrics. Every applicant is high risk regardless of credit score. It would still be wise to set a minimum score requirement, much lower than 650, but the reality is that C class tenants don't place much importance on protecting their credit. They often use credit without concerns of having to repay.
AND without fear of being correct, stating an absolute that all applicants with a score below 650 don't place much importance on their credit is literally a ball faced story and has no basis in fact. There are too many factors nowadays that can deflate credit in one day. Things such as Identity theft. Their spouse wiped out the accounts, ran up the cards without their knowledge. A child, whether adult or adolescent did something stupid with their cards or identity. I know of at least one family member that happened to. The child stole the checks, the cards everything, and the parent wasn't aware for months. Stuff happens. On the flip side looking at all of these postings, from a consumer side, I find that investors are asking a fortune for properties that are in bullet ridden neighborhoods and have done nothing but "paint" the place after purchase. As a consumer I have a choice, too. And I screen and run background checks on YOU. This is not a unilateral contract. They are bilateral. the 14th amendment comes to mind. Having dollar signs in your eyes and heart with no compassion or ability to read between the lines is not the kind of landlord I would want, nor would I sell to. Sellers can be choosy, too. MY 2 cents. There is an old saying, there but for the grace of God so I. I worked with people who were "investors" like the ones on here. I saw their climb up. I saw them fall down and become tenants. Just sayin.
Originally posted by @Alissa Engel:
@Cameron Riley
Always run a credit check!
Most of the reasons why have already been covered by others. Here’s an additional reason that I learned the hard way: people that say they have no recent rental references because they’ve owned for a long time. This is not always true....they might know that they have bad references. A credit report will show their mortgages.
OR it might show their property is paid off, and they haven't rented in a long time because they were living in a relatives property. You folks are looking at this as black and white. Things are never black and white. They might not have references if occupying a friends house or a relatives. One comes to mind and she was on Oprah years ago. A very high profile HR recruiter house sat in some of the most expensive homes in Georgia. This is about 25 yrs I spoke with this person. They were very credible, yet had no mortgage or rental history. Things are not always what they seem.
Originally posted by @Susan Maneck:
Originally posted by @Cameron Riley:
@Susan Maneck
True! Lol! I never run credit! I work in the urban areas and low income areas of the investment business.
Well, I do want to know if they have ever been evicted or they don't pay child support. People who don't take care of their kids are not likely to take care of my house.
Finally a statement that is probably true. Unless their DNA shows they aren't the parent.
Usually I just input the tenant's name into the free public criminal database for my county. It doesn't pick up the out of area offenses, but has worked well for me thus far.
@Cameron Riley
Credit Check
Background Check
Eviction Check (none within 10 years)
will call employer and must have job at least 6 months.
DTI not greater than 60% including rent
Gross Income must be 3x rent
I have eight units in a C area and I still hit all of those requirements. I’d rather have a unit sit for four weeks than rent to a problem tenant. You will have much less stress.
Our background checks automatically come with a credit check. About 9.5 out of 10 potential tenants don't have good credit. The reason we always check the credit is to see what they are spending their money on. I have seen scores around 600 because they have high student loans and their debt to income is out of sight. It also shows how many, if any, late payments they have which is a huge indicator. We tell them credit is a factor but we like to see the whole picture before we determine anything. There are some people who are very appreciative when given a chance and will treat the place better than someone with a good score. I would never skip the check.
1) Yes
2) Yes
3) You have to look at the debts and why the have a not so good credit score. Some young people struggle with payments, but they may be in a better position now, and that is why they want to rent a better place than the one they had before. They had experience loss of job not in their control, making it impossible to keep up with their previous mortgage. They are maybe young, with not enough credit history, but with a lot of debt and now with a very good salary which is not reflected yet in the credit report to keep a good track of on-time payment history, etc. You have to look at the big picture.
Many here probably thinks you don't really need to pull credit in very low income places because no one has a good credit score anyway!
My apts are in Brooklyn, NYC and in good areas.
A few of my buildings are near a school, Pratt Institute, that attracts a lot of Foreign students.
Pratt is EXPENSIVE (think $30k to $50k per year with Dorm).
I can't really do credit checks on foreign students. So I listen to their stories and then verify it.
3 Students from Pratt came to me to apply for one of my rentals.
All were Chinese. None will have a Credit Report I could pull. BUT... they each had very wealthy Parents.
One was the child of a very well known CEO of a Beijing developer and the company was worth around $1 Billion.
All I needed was for this one student to prove their relationship, then I would have called the Company directly and verified their relationship. I wouldn't need their Credit Score.
Ultimately, the kids lost the apt because an even better candidate applied with over an 822 Credit Score!
So, on the high end... there are some times when I won't pull a Credit!
In fact, since most credit scores are available on your Credit Cards, Online Banking Accounts, etc. All I do is ask them to pull up their credit from one of those account on their phone and show it to me. If it's high enough, I won't bother with the report at all.