Landlords often rely on credit checks to qualify applicants for their rentals. As an individual landlord managing your own property, you have flexibility with who you can rent to. If a potential tenant has a borderline credit score, you don’t have to rule them out immediately. You can look at other factors to determine if they’d make a good tenant or not.
When to Waive a Bad Credit Score
If you’re debating renting to someone with a borderline credit score, the first thing you should do is find out the reason for their score. Extenuating circumstances often say a lot more about a person than a single number. This person might’ve had their identity stolen, or their credit report contains an error they’re unaware of.
Learning how to read a credit report will also help you get a fuller picture of an applicant. Most landlords agree that they look at the details of the report instead of focusing solely on the number. A current steady income would also be a good reason to look past bad credit history.
How to Minimize Risk Posed by Tenants with Low or Borderline Credit Scores
- Ask for paystubs. A credit report presents their financial history, but paystubs will tell you more about their current situation. Also, keep in mind that the ideal amount of monthly income to spend on rent is between 30 and 35 percent.
- Check rent receipts. If the applicant is renting their current home, ask to see proof that they made rent payments. You could also call their current landlord to find out if they’ve been a good tenant.
- Ask the tenant to sign with a guarantor or co-signer. A co-signer provides you with a backup plan if your tenant doesn’t pay rent.
- Charge more for a security deposit. A person with bad credit is a higher risk, so you wouldn’t be unlike any other lender by asking for a larger payment upfront.
Sorting through applicants for your rental property can be an arduous process. Screen Renters can do the screening for you, from start to finish. Set up your free landlord account and get started.