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THE SOLUTIONS (tenants with bad credit)

There are SOLUTIONS when dealing with tenants that have bad credit..... they do not necessarily have to be turned away......! EVERYONE needs a place to stay..... even if it's NOT YOURS!

In the market areas we serve, many "would-be-tenants" apply for rentals having poor credit. Rarely have we seen scores over 700. The reasons given are listed on the previous post written July 9, 2007. We have seen a commonality that we have grown to expect..... but MUST deal with!! We simply cannot turn EVERYONE away in expectation of the ideal tenant showing up with excellent credit!

('Scuse my vanucular... but, it "JUS AINT GONNA HAPPEN!!!")

SO..... what do you do???? Here are a few S O L U T I O N S (that work)

S Security Deposits - ask for an extra amount prior to renting (can be taken in increments)
O Obligate tenant to a short term lease (Month to Month) until proven to be reliable with paying
L Lease unit with a credit worthy co-signer
U Utilize the services of an EVICTION attorney (after the fact - use $ from the x-tra SD!)
T Transfer rent payments from tenant's pay automatically monthly
I Incite tenant in rent-to-own home-ownership preparatory plans
O Open "pay rent online accounts" and accept credit card payments
N Notice - Discern when tenant-to-be HAS learned lessons from past - BUT FOLLOW RULES!!
S SAY NO! - When credit reports show NOTHING being paid on time!

Now, this works for those needing to rent......what about those with poor credit looking to purchase????? Look for the next topic: "WHAT WILL MY BAD CREDIT BUY ME?"

Posted by Diane Rice on 07/16/2007 03:43 PM

Comments (20)

tenants, renters, rice property management, challenges

This post has been included in Illinois Information Cook County, IL Information
Post is included in group: South Illi/Indi Realtors
Post is included in group: Property Management

20 Comments on THE SOLUTIONS (tenants with bad credit)

JUL

2007

I listen to the reasons credit is shaky. I watch the body language. I check the references. And sometimes I make exceptions to my rules. I like your creative approaches. Real estate is more shades of grey than black and white.

Chris: - now "body language is definitely a SURE- GIVE-AWAY! I like your answer - yes, shades of grey.... that's why we are called REALtors..... one has to be REAL! Thanks for your comment!

Your SOLUTIONS are GREAT!!

Gerald Baxter Columbia SC 29229 803-807-8728

Gerald: thanx - glad you like them! Believe me they DO work too!

I like your post. The pay rent online accounts I have never heard before. Do you mean like paypal or something? That would be a good idea. Thanks for the post.

Cheri: Thank you! The software program that comes with my Property Management accounting allows for rent payments online. There are several of them out there. I'd be glad to email a list if you are interested.

I love it and yes you are REAL , nice post.

Good post. I like the use of the word solutions. It shows some real positive thinking.

I also really like the way that you try to help people.

Bob, you know, in changing times we must use what WORKS.... and "get over" the facts that things are not "what they used to be!" Thanks for your vote of confidence!

Steven: Thanks for stopping by and adding your input! Listen... if WE don't help them who will? and where will they go? They affect us all.

Good Post Diane...

Chris - be careful reading "body language"... we are not in the judgment business...and you certainly do not want to get into who gives you good vibes or bad vibes.

I typically let people know up front that bad credit will only be acceptable with a larger deposit, last months rent, etc... if they can not afford this or do not want to pay this, then they are out.

Good for you Rob! Thanks for sharing your comment!

JUL

2007

Diane, really good post! We typically just turn them away, but that is what our market is currently allowing. However, we are expanding into a different part of the state where we commonly see sub-600 scores. We are learning to adapt. Thanks for the ideas!

JUL

2007

We don't routinely do a credit check (although we can, if the Owner wants it). We rely more on

1) 3 yrs or more of residential history- we check every bit of it, including checking that the person they put down as landlord really does own the property, and that the ph# REALLY IS THEIRS.
2) If it is local we drive by and look at the current property outside.
3) Job history, 3X the rent in income or more
4) A check of the AZ public access to court records
5)A check of the sex offender site (yes, we turn up a hit once in awhile)
6) The prospective tenants' attitude, cleanliness, methods with kids/pets, whether or not they filled out our app completely and accurately, are they pushy and demanding, and other such things that aren't cut and dried. Yes, we go by gut feeling sometimes if the hard info is a maybe.
7) a security deposit of more than a month's rent

We manage 70 some residential rentals, and do MAYBE 4 or 5 evictions a year, often for Owners who come to us with the tenants already in place so we can get them out. We turn down a lot of people, mainly for not enough income or for legal problems.

The cheapest, easiest eviction is the one you don't have to do because you didn't rent to them in the first place. Yes, people have to live somewhere, but it doesn't have to be in one of our rentals.

John: Thanks for sharing - YES, you see the need to adapt right? Folks growing up now-a-days have not learned principles from the past..... and they have the media luring them in EVERY field! It's very easy to get entrapped in buying what you CANNOT afford, then allowing the payments to lapse.... in America, i am ashamed to say.... it's like it's EXPECTED! (buy-now/pay-later!) (bad credit? no problem!) (c'mon in NO credit check done!).

....there i go 'jus a preachin'! (ya got me stirred up!) ok ok i'll do a blog! (tee hee)

Leslie: very good criteria to apply in Property Management and i'm glad it works for you..... That's SUPER!

The assortment that come to apply for our rentals could not pass the first 3 requirements on your list, however we find the best of tenants that pay on time monthly and stay for years.... some go from renter to owner. Thanks for sharing!

Leslie, I find it curious you don't routinely do a credit check. They don't cost alot and usually the tenant pays for it, and I would bet any owner would want it done. If any one went to a bank and wanted to take out a loan, there's no question about it, you will have a credit check done. Some tenant are very good liars and scammer. It's not worth skipping this step.

I agree with all your other steps but would add the credit check.

JUL

2007

An amazing thing happened yesterday... only 2 days after posting to this blog a tenant prospect called to set up a showing and asked if I was waiving the security deposit. I almost said "you're kidding, right?" Then I realized someone else MUST have given her this expectation. With increasing competition for tenants, do to the oversupply of rentals out there, pressure is being put on everyone to reduce costs to lure tenants.

I happen to agree with Diane on this one key aspect though... bad credit means EXTRA SECURITY DEPOSIT, no matter what. If they find someone that is willing to let them rent without this limitation, let them go, the owner of that property could be a future customer asking you to deal with their "problem tenant".

ROB!!! That's so ironic!- yesterday i ran credit on someone looking to rent, and the report was baaaaaaaaaaaaaaaaad!!!! When the applicant called, i did inform her, saying we would not be able to accomodate her without 2 months of security deposit first.

She then made arrangements to pick up her (hold deposit of $250.00). I was fine with that since i had other interests...... guess what???? She called back hours later after discussing it with her parent and has now agreed to pay the extra amount! Now, in this case, she did have a verifiable job making enough.

I'm glad to see this "Property Management Group" in full activation! Thanks for sharing ROB!!!

WE don't routinely do a credit check because we've found by experience that the information (even for addresses and such) on the reports can sometimes vary wildly from one credit bureau to another, and also we've found that evictions or other judgements may not show up on the credit check- they are only there IF the person getting the judgement filed it. And sometimes a tenant may tell us that they don't have great credit, but they actually have good rental references ( I explained how we check in my post above- we AREN'T gullible).

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