What do you do if only one applicant's credit score is high enough?

Question

I just listed a 3br house for rent. Until now, I haven't thought about how to handle it if not all of the applicants meet my minimum credit score. Should I just deny them all? Or, should I accept with conditions if one or more applicants do not meet the minimum credit score? Or, is there some other alternative?

Ned J. · Answer

Credit score should be #3 or 4 down the list of the most important parts of the screening. It also depends on how bad their credit is and WHY.

Verified income, job stability, rental history....WAY WAY more important than credit score alone.

Tim Baldwin · Answer

Accepting all applicants, when one or more of them is not qualified, could pose a problem in the future if the applicant/tenant who is qualified leaves the property with the unqualified tenant(s) remaining (it happens!). This happens when a married or non-married couple splits up while they're your tenants. In that situation, if the tenant who leaves is the "primary income provider" and doesn't continue helping the tenant who remains, the tenant who stays may not be able to afford living there.

That said, there are fair housing issues as @Christian Styles mentioned. In particular, fair housing issues may come into play when a husband and wife or "couple" apply jointly. Many times, one of them doesn't work or works part time or simply doesn't have the income and credit qualifications that meet your selection criteria, but the other spouse or person does as the "primary income provider". To deny their application in that situation on the basis that the non-income-providing person does not make enough income or having good enough credit could lead to a FHA complaint.

There are provisions that could be put in the lease agreement that the lease terminates if one of the tenants vacates during the tenancy, but you should consult your attorney about putting that into your lease. Obviously, if the tenants fail to timely pay rent, you can enforce their obligations with a notice to pay.

Your question is legal in nature, so I recommend that you consult your landlord or FHA attorney in your state about it. Best wishes.

Adam Bartomeo · Answer

There are 2 main factors when it comes to tenants paying rent

1. Their income/debt to income - Can they afford to make the payment?

2. Their credit - Will they pay the rent?

We take ALL applicant scores into account and if ANY of them are below our limit we ask for advanced rent. The worse the score the more advanced rent. In our current market conditions we need to find reasons to say Yes and find win/win scenarios.

Nathan Gesner · Answer

I use an application score sheet. Individuals receive a score of 0 - 3 for various qualifiers like credit score, debt-to-income ratio, length of employment, landlord reference, etc. Each individual gets a total score of 0 - 30. Two or more individuals are combined for a group average score. 15 or less, and we don't rent to them. 16-20, and they pay a double deposit. 21 - 25, and they pay 1.5x deposit. 26-30 pays 1x deposit.

Rob Harnden II · Answer

"Accepting all applicants, when one or more of them is not qualified, could pose a problem in the future if the applicant/tenant who is qualified leaves the property with the unqualified tenant(s) remaining (it happens!)."I hadn't thought of this, thanks!!! This possibility will help me figure out what to do. Thanks again!

Jake Knight · Answer

We typically average all the scores together to get one number.  I also agree that credit score is just one metric to consider.  We've had plenty of really good renters with lower credit scores.  Typically, if an applicant barely meets are criteria, we will charge a higher deposit.  Keep in mind in my market that they are eligible to get the full deposit back - which should incentivize them to take better care of the property.

Rob Harnden II · Answer

I agree. I certainly do not value the credit score as much as some of the other criteria. I also believe it is super important to see the complete picture instead of basing a decision on one factor. The only reason I am struggling with this, and will consult an attorney (thanks for the advice Christian) is that I once I make a decision, it needs to be used consistently with everyone no matter how unimportant a specific piece of criteria might be. So, whatever I decide needs to be VERY GOOD from the start! The few comments I've already gotten are very helpful. Thanks.

Rob Harnden II · Answer

"It's important that no matter what you do you do it for everyone going forward"

This is my main concern. I need to devise a policy that I can use with everyone. But, there are many variables that make it difficult. I'm not going to be able to use a simple "cookie cutter" policy.

I really appreciate the feedback.

Christian Styles · Answer

This is completely up to you, If an individual came around with perfect credit and met your other income requirements I assume you would rent to that person. So does a bad credit roommate/co-applicant bring their application down enough to warrant denying them?

There are many alternatives you can use, I would urge you to check your local laws but I know here in Cleveland, OH we can charge an increased deposit or we can also require a guarantor (who can have different credit req. then someone living in the unit)

It's important that no matter what you do you do it for everyone going forward, making exceptions for screening for some but not all can become a Fair Housing issue.

Happy to talk to you more and run through our screening process for tenants more in depth. Shoot me a PM.

What do you do if only one applicant's credit score is high enough?

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