Why you shouldn’t refuse to look at applicants with low credit scores.

Some properties listed for rent have notes saying, “must have 600 credit score or better” or “must have good credit” When advertising a property for lease you should avoid comments in reference to a persons credit score.  Let me explain why.

“Must have good credit”  that is ambiguous.  What is “good credit”?  You may be scaring off the perfect tenant!  Most people don’t have a clue what their actual credit score is.  If you ask someone to describe their credit as poor, fair, good or excellent, very few will say excellent most will say fair and most people who say fair to poor actually have a credit score that meets the minimum requirement for an FHA loan!

Credit score should be addressed during the application process.  A person who has a foreclosure or a bankruptcy, especially a recent one, may have a very low credit score.  Divorce is another factor that can often really hurt a persons credit score.  You have to look at the big picture.  If someone has a recent bankruptcy their score will be lower but they should be collectible.  If they have a good job history, make good money, their debts have just been wiped out, it will be a while before then can get enough credit to get them back in trouble, they should be a good prospective tenant.  The risk is lower in this situation than with someone who has an 750 credit score but a lot of debt with recent increases in late payments or collections.  If that person claims bankruptcy you may not be able to collect on any unpaid rents.

The information on the report is just as important if not more important than the number score.  You want to for recent increases in late payments or collections and for patterns.  Is there a particular month that they pay bills late?  This can occur for people who work in an industry with scheduled layoffs.

An unexpected illness can also lower a credit score.  If someone has to take a medical leave they often get reduced pay for the period they are off.  This can cause an unexpected financial burden which can be remedied when they return to work but it will take a little while for the scores to improve.

It is best to gather all the information necessary before making any decisions.  You can ask for clarification on anything that raises concern.  Let interested parties fill out the application and provide you with the information you need to make an informed decision.