Co-signer has great income but less than stellar credit, wwyd?

Question

Hey think tank!

We have a property for lease with an interested applicant that is starting work at a government agency where they will be given a stipend allowance. They are right out of school and wont be making the required 3x rent and their credit score is lower than our minimums with some medical debt sent to collections. Their parents have agreed to come on as co-signers, they make a great salary (multiple 6 figures), steady and impressive employment, however their credit report shows a score less than our minimums with some high amounts of CC debt (5 figures) charged off as bad debt. I'm under the impression that a co-signer should be well above minimums however my partner is less hesitant. We've discussed a month to month lease option as a compromise?

Has anyone had experiences with a similar situation, would love to hear your thoughts and words of wisdom!

Charles Carillo · Answer

@Rick McGuinness

If someone does not pass our background check, we are not going to rent to them, with a 1, 6, or 12-month lease. It would depend for me on where the property is located. If it is in a tenant-friendly city/state, I might pass altogether since it sounds like this family doesn't pay all of their bills, and it will be harder to evict them.

If you are in a more landlord-friendly area, and you are still interested in renting to them; I would increase the security deposit amount. I would want 2-3 months of rent as a security deposit.

John Semanchuk · Answer

@Rick McGuinness I don't put as much stock in a credit rating as some landlords do. I have a tenant now with low income and no established credit but her parents (high income, SOB) cosigned and she's been a great tenant for two years. I always require 1st month, last month and security deposit (3x the rent total) and that weeds out a lot of the undesirable tenants. I've not had a serious tenant problem since I started collecting last month's rent up front. That said, I also make sure I meet the tenant in person and watch for red flags in behavior/answers.

Brandon Yamada · Answer

Thanks Richard, appreciate it.

Theresa Harris · Answer

Have they had any problems recently with their credit? Can you ask for a larger deposit?

Troy Gandee · Answer

@Rick McGuinness It's not uncommon Downtown for parents to have to be co-signers on leases. That market is chock full of students and young professionals who are not going to meet the requirements. The next best option is to get a parent or family member to co-sign. If you're struggling to get it leased, this is probably the best you're going to get in the near future. The rental market Downtown slows significantly near the end of summer. I would probably ask for a higher deposit as an assurance in the event that they stop paying.

Rick McGuinness · Answer

Thanks for the reply Charles! We are in downtown Charleston SC and have had a longer than expected time trying to find tenants in what is a very hot rental market. This is the first real applicant that has shown interest and I think we might be seeing $$ where there may be just headaches.

Co-signer has great income but less than stellar credit, wwyd?

Co-signer has great income but less than stellar credit, wwyd?

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