Bad Credit May Not Mean A Bad Renter
Did you know if you don’t build credit, you’ll have no credit score whatsoever? It won’t be bad, and it won’t be good—it’ll just…not exist. Did you know the agencies who monitor credit scores reset after a certain number of dormant years? For example, if you took out a loan and paid it off so fast it gave you perfect credit in 2006, by 2019, there’d be no record you did so.
Even though you had great credit for all that time, because you took out no subsequent loans, or were otherwise financially responsible, your past record is lost. So sometimes, as a landlord, you’re legitimately going to come across cases that “break the mold”, as the saying goes, defying expectations. Bad credit may not mean someone won’t be able to pay rent.
What bad credit does mean is that you’ll have to use collateral methods to determine whether or not someone can pay you. There are a number of tactics worth considering, in this writing we’ll briefly explore three that caacas a gestalt of landlord best practices in renting to low or no credit tenants.
Proof Of Funds, Job, And/Or Previous Rent
Ask for a bank statement to see how much money they’ve got in their bank. If someone with bad credit has enough for their first lease term and then some, it might not be a bad idea to rent to them. At the very least you can be assured of the deposit, first, and last month’s rent. If they don’t have extensive funds, look at their pay stubs.
Ask for pay stubs that are as recent as possible. You can also use PayPal like a bank statement; though you should be able to see a pattern of deposits over time if they’ve got regular gainful employment.
Also, if the prospective tenant were a renter before, then ask them to deliver you some renter receipts. These will be available through their previous rental situation, a bank, or their own records.
If you still can’t be sure whether or not you’ve got a lemon renter on your hands, you can just drive the price up on them to protect your interests. That may mean an increased initial deposit, or it could mean a higher rent rate. You can even incentivize this process by offering a free move through rebate, something readily available as UMoveFree reports.
Sometimes you increase the cost of your apartments owing to a desire that the applicant may see themselves out. Sometimes you do so to protect your assets, but want the tenant to stay. Different situations require different strategies for best results.
Is There Good Reason For A Bad Credit Score? Or A Cosigner?
As outlined at the beginning of this writing, sometimes a bad credit score exists for a good reason, and one that has nothing to do with the renter. For example, what if a parent tanked their credit before they were eighteen, and they could prove that to you? If they have such documentation, in addition to regular pay stubs, you’ve got a potential good tenant.
But if you’re unable to verify that whatever credit score they have has come for a good reason, you can additionally seek a cosigner on the lease. Such an individual will give you a legal guarantee to protect your business interests. You’ve just got to be sure the co-signer is themselves an individual who can be trusted for the associated responsibility.
Qualifying The Right Tenants For Your Property
It’s important to be diligent in the vetting process you use to qualify tenants for property rental on your premises. However, you shouldn’t avoid critically examining the available evidence. Today’s society has many intrigues and complexities that strict bureaucratic approaches aren’t adequate to counter. If you’re too officious, it will impact your bottom line.
A good balance in vetting bad credit tenants is learning the reasoning, seeking cosigners, increasing your deposit or rental rates, and asking for evidence like pay stubs, bank statements, or rental receipts. Through this threefold approach, you should be able to vet the majority of renters, determining if their bad credit will be a risk to your property.