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Looking Beyond the Credit Score for Quality Tenants

An individual checking their credit score through an app on their phoneAsk any landlord and they’ll tell you that their number one goal when assessing a new tenant is protecting their rental income. In the quest for quality tenants, landlords have traditionally looked at their prospective tenant’s credit scores to help them determine the level of risk before signing a lease.

A few landlords might only consider tenants with impeccable credit scores. At the very least, you’re looking for someone above a certain threshold. These landlords base their tenant approval choices on the idea that if someone has a great credit history, they are more likely to have a financially stable future. While credit scores are important, they don’t always tell the whole story.

Two significant factors that typically go into determining a credit score are:

  1. Payment history
  2. Amount of money a person owes

Other factors can include the length of credit history, types of credit, and new credit applications.

While these items are important, they aren’t telling us anything about their rental and eviction history nor their background and criminal history. A landlord could be missing out on an otherwise extraordinary tenant if the majority of consideration is placed on the credit score.

What else should I consider when screening for quality tenants?

Excited young couple have meeting in office with a property managerWhen screening rental applicants, property owners often want to know more about the tenant’s financial situation. A credit report includes a lot of information beyond a simple credit score, information that an owner can utilize to conclude whether or not the tenant is able to pay rent on time and in full. For example, an individual who has made late payments in the past may have a lower credit score, but you could also find that they are currently paying their bills on time.

Despite the fact that a previous vehicle repossession or a credit card charge-off is a deal-breaker for numerous property owners, it is worth noting that many people were ruined some years ago because of the Great Recession. Through no fault of their own, they may have lost their homes or jobs, but have since recuperated and got stable employment and kept up their credit accounts as well. Or, maybe a past medical emergency caused the applicant to miss a deadline on their medical bills or student loan payments, but they’ve made good financial choices since then. In these situations, the score might be a less significant issue than the tenant’s payment history over time. A few slip-ups many years ago had better not prohibit an otherwise solid applicant from being considered.

To get an even better understanding of an applicant’s situation, it’s essential to gather information from the applicant that is not on the credit report itself. If the possible tenant has a valid reason for their lower credit score, such as those listed above, that may be a reason to keep them under consideration. Also, property owners should always supplement an applicant’s credit report with references who can vouch for their potential. If an applicant has a strong history of paying rent on time and a stable income, these factors may be better indicators of how they would do as a tenant than numbers on a credit report.

In summary, there are 3 questions to ask yourself when checking credit scores:

  1. What is the story behind the score?
  2. Have I verified proof of income?
  3. Have I evaluated their rental history?

Tenant screening can and should be a complicated process, especially for single-family rental homes. Property owners generally want someone who will be a stable, long-term tenant, making the decision an even more critical one. At Real Property Management Northern Utah, we perform a thorough screening on every applicant, from credit reports and beyond. Our Eden property management professionals know what to look for, and how to choose the right tenant for every rental property we manage.

If you would like to learn more about our screening process or would like to speak to someone, please contact us online or by phone at 801-546-1770.

We are pledged to the letter and spirit of U.S. policy for the achievement of equal housing opportunity throughout the Nation. See Equal Housing Opportunity Statement for more information.