As a landlord, you consider the credit report of applicants the most important thing when deciding whether to allow them in or not. This is one document that gives you deep insight into the financial history of an applicant. However, you cannot, and should not take a decision on the application of an individual solely based upon his credit score. There are many other things like their criminal record and employment record that reveal interesting things about the applicant. What should you do if you have found that the applicant has a bad credit report? Should you reject the application right away? No, there are many other things to look at before deciding on the application of an individual.
What if your rental property is in a poor location or its condition is not first class? In such a scenario, it is common for the landlord to be approached mostly by tenants having a bad credit report. It is a catch 22 situation for you as you will not have a single tenant if you reject applications accompanied by bad credit reports. This is when you need to look at the circumstances of individual applicants to know why their credit reports are so bad.
If you buy a property in a location that is far away from downtown area and not very developed, you will be surprised to find that all applicants desirous of tenancy have bad credit reports. You have no option but to allow some of these people with poor credit to live in your premises.
Options when every applicant has a bad credit
- Check if the information on the credit report matches with the details provided by the applicant on the application form. If there is any discrepancy, reject the application.
- Look at the employment history of the applicant. Does he have a steady job scene, or has he been changing companies quite frequently? As a landlord, you are better off with a tenant who has a permanent employment in a local office.
- Has the applicant been paying their bills on time? Most tenants live from one paycheck to another, so it becomes important to know if they are making payments on time or not.
If you are still in doubt, ask two references of previous landlords form the applicant. These landlords will speak without any fear and they will tell you everything you want to know about the applicant.
If you do not want to take chances with an applicant, just check his rental history. Has he been changing accommodation quite often? If yes, then he is not a good candidate to become a tenant in your property. You want a family that lives for a long time in your property to have stable rental income.
Is bad credit a result of life altering events taking place recently in the life of the applicant? If yes, then you need to consider the application of tenancy of the individual. Listen to the story from the applicant directly and then match his details with the information provided in the application form. If both versions are matching, you can allow the family as tenant in your property.
In the end, it suffices to say that a bad credit report is not and should not be the sole criterion to judge the trustworthiness of an applicant. You might be surprised to see a tenant with bad credit proving to be a very good quality tenant in the long run. Of course, you have the option of reducing risk by requesting higher security deposit form applicants with bad credit. You are also entitled to charge a higher monthly rent form such applicants.
If you’d like to talk more about property management, or you need help with Everest Property Management, please contact us at Everest Realty.
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Palm Coast Property Management
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As a top producing Realtor and Property Manager; Terry specializes in sales, extensive construction homes, rentals, REO’s, short sales, and all aspects of Real Estate. After graduating the University of Michigan with a master in MBA, Terry continued his endeavor and now has over 15+ years of experience in the Real Estate world. If there is anything that has to do with Real Estate and sales, you can always be sure of Terry to provide important, specialized knowledge.
