Finding a great tenant is the goal of every landlord but in order to determine if someone has the potential to be a great tenant, reading a credit report is something you have to learn to do.
Unfortunately, landlords find this process to be intimidating. I have seen a lot of different credit reports over the years and I have to agree that some of them are very difficult to look at and interpret. Finding a credit report that you like the look of and using the same credit report every single time makes reading a credit report a lot easier.
The issue that I have been running across a lot lately is that applicants are lying more than they used to. At least that is what I have found.
I pulled out a credit report that I just ran and I am going to talk about it. Obviously I can’t show you the entire report but I will go over the important things to look at. I pulled this one out on purpose because it is a little more complicated than your average situation.
There are some things that you need to know about me. I use systems for everything I do, including finding a new tenant. I have a pre-screening system that I use. The first thing that happens when someone wants to see a property is that I email them a pre-screening form to fill out. If they meet my guidelines, they get to tour the property and then apply. This allows me to sidestep anyone who tells me up front that they don’t meet my guidelines. I also only deal in facts. It is very easy to get derailed by someone who gets in front of you with a sad story. I don’t allow myself to involve emotions in this process. While I feel terrible for some of these people, I stick to facts!
This applicant first filled out the pre-screening form and appeared to meet the guidelines. He then toured the property, loved it and applied. Everything looked fine after reviewing the application. He had attached a document called “Income verification” and it wouldn’t open. I went ahead and ran credit and asked him to email me the document directly.
- 3 bed, 2 bath property.
- Rent is $1,200
- Deposit is $1,200
- 3x the rent is $3,600
Requirements Stated On Application
- Income of 3x the rent.
- At least 12 months on job. Job history can meet this in many cases.
- At least 12 months of rental history. I require this for single family homes.
- Credit score of at least 600.
Information Provided By Applicant On Pre-Screening Form And Application:
- Stated Gross Monthly Income: $4,000
- Stated 2 years on job.
- Stated 2 years of rental history on pre-screening form.
- Stated credit score of 710. Further stated that he had excellent credit.
- Income statement attached but couldn’t open.
His Credit Report
- Credit score 559.
- Total debt: $53,788
- Debt in collections: $52,883
- Mostly student loans.
- Car payment behind 3 months.
- Was actually a letter of intent.
- Training Pay $18.22 per hour and $27.33 per hour OT.
- Once training is complete, promoted to recruiter.
- $865.38 base per week starting week 23.
- $45,000 annually.
There are several issues with this applicant right off the bat.
- This person stated that he has been on this job for 2 years. That is inaccurate as he has attached a letter of intent dated April 22, 2022. It is April 28, 2022 as of right now. He hasn’t even started his training! Remember, he put that he was on his job for 2 years.
- The “income state” or proof of income is just a letter of intent with no pay stubs.
- The base training at $18.22 per hour is the pay for 13 weeks of the 26 weeks and isn’t income of 3x the rent.
- The credit score is below 600 which is stated in the online listing and the application.
- He has a large amount of student loans and a car payment in collections at this point. He hasn’t paid on the car in 3 months.
- I am also concerned with the large amount of debt in collections =>$42,883
- He doesn’t have any rental history at all. I asked him about it and he said he lived with family while in college.
This is one of those applicants that annoys me. He was very nice and I liked him. But, we started off on the wrong foot when he lied about his job history. Yes, those are strong words but I have a huge problem with any applicants who doesn’t tell the truth right off the bat. I asked him why he put that he had been on his job for 2 years and he said that he had signed a contract with them for 2 years. I told him that I considered this to be a lie since he hadn’t even started his job yet. He said “It was an honest mistake”. I didn’t see it that way. A letter of intent is not job history.
He had also put on the screening report that his credit score was 710 and actually said that he had excellent credit. I called him out on that also. He told me that he had never run his credit before and had just guessed. Someone told him that most landlords don’t run credit so he shouldn’t worry about it. He was shocked when I ran it and he saw how low his credit report was. He said that he intended to start paying on his student loans once he had a job.
He was also untruthful about his rental history. Again, he said he didn’t think that I would check.
I have a serious issue with any applicant who lies and will always disqualify them. They will only get worse as time goes on. The credit score also disqualified him for me because it was just too low. If you don’t believe in having a pass / fail credit score, have a way to mitigate your risk. I will accept down to 575 with an extra deposit and / or a co-signer.
His income is also an issue because in the beginning, he won’t meet the 3x the rent threshold for 13 weeks. Moving is expensive and he will have to put out a lot of money just to get in. Income is something that is always a pass / fail criteria because when you make exceptions, you can harm an applicant or tenant.
Rental Guidelines And Rental Criteria
I have guidelines and I make no apologies for having them and sticking to them. Following my rental guidelines and having rental criteria have saved me from renting to a lot of bad tenants. I don’t like chasing after tenants who don’t pay. Evictions make me angry! It means that I screwed up somehow by renting to a tenant. Bad tenants are usually not bad people but they do lack the skillsets to make them successful tenants.
My message is simple. Stop renting to bad tenants! Have rental guidelines and rental criteria and stick to them every single time. Run credit so that you know what you are getting into!
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