Double security deposit in leu of poor credit score?

[Heath Jones]

Just wanted to start a conversation about strategies for dealing with potential renters who have poor credit, a bankruptcy and several delinquent accounts.

For example right now, I have a potential renter who is in her mid to late 40’s, and living with her sister and her sister’s husband. She is trying to get back on her feet after a divorce and wanting to move into her own apartment. Given her credit report, she is an automatic deny and there is not even a glimmer of hope to feel confident about her ability to pay rent reliably. I feel bad but I will be denying her based on credit report.

However, I’m wondering if I’m being too unsympathetic and if there are ways I could be more compassionate and help her out. I’ve talk to others who have said they will ask for double the security deposit if the credit score was low because of falling on some rough times. In the case of my example, I know she is going to have a real difficult time finding someone who will rent to her, but I don’t want to be stuck with a tenant who doesn’t pay the rent because of my good nature. I would love to help out but I have to think about my business. Would love to hear everyone’s thoughts on this!

[Nathan Gesner]

Originally posted by @Mike McCarthy:

The only way I’ll even consider someone with a lower credit score is if they are 1) upfront about it, and 2) have made obvious changes to fix it.

I had one family that was honest about it when they came in for the walkthrough. They bought a house above what they could reasonably afford, etc. They were selling it and moving into a cheaper rental. Their credit check and listed/contracted home backed up their story.

I did a double security deposit and it’s worked out well.

On the other hand, I had another perspective tenant not say anything, credit at 601 or something, and significant credit card debt from department stores and specialty stores. Oh, and a DUI. not being flexible there.

Everyone has their own comfort level. I manage about 360 rentals and about 1/4 of them are rented by lower-income tenants. A good percentage of them have low credit. However, I use an objective score sheet that ranks them 1-30. Tenants scoring 16 - 20 pay 2x deposit and tenants scoring 21 - 25 pay 1.5x deposit. I instituted this about three years ago and the results are fantastic. Out of 350+ rentals, see about 1% moving out and owing more than the deposit can cover. It's a great way to increase occupancy while minimizing risk.