As you probably know, when a prospective tenant is interested in renting one of our units, we should always be looking at the prospect's ability to pay the rent on time. That's what we refer to as tenant screening. So, I certainly hope that all of you out there do your due diligence when it comes to renting your units.
Well, these days you may come across a few prospects who may have a foreclosure on their credit report. What do you do with that? Do you ignore it? Do you decline to rent to them? Well, it depends! Here are a few things we should be carefully looking at to determine if a candidate is right for our unit.
- See if there are any other delinquencies on their credit report. This will determine if a person habitually pays late or if it was just the bad loan that got the best of them.
- Check how long ago the delinquencies started. I've see credit reports where you can clearly see that an extraordinary circumstance must have occurred for a few months, because the credit is clean before and after that.
- Talk to your tenant, ask questions. Don't just decline the application, because of the foreclosure. There may be a very good reason as to why that happened. This is the time to talk to your tenant, not when you are taking them to court for an Unlawful Detainer Action lawsuit.
So, a foreclosure should not automatically disqualify someone from being a renter. Read between the lines of the credit report, ask questions, analyze both what they are saying and what you see on paper. Cross examine and match pieces of information as you can find those on the application. You can ask for as much supporting evidence as needed for you to make an educated decision. Don't feel like you are offending the person for asking for the documentation. They are aware of their situation and they also need a place to live.
And trust me, it pays to be thorough!
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