The Credit Report

A smart landlord always runs a credit report. In my opinion, it is more for discovery than for judgement. A face to face meeting tells you a lot but a credit report is like a resume. Who are they? Do they pay their bills on time? Have they had problems? Has the person been truthful about their credit?

Do I rent to people with less than stellar credit? YES!

Firstly, I don’t even mind having a tenant with bad credit. Most understand that they are a bigger risk and are prepared for a large deposit. I make sure that I get the biggest deposit allowed legally.

Second of all, the tenant with bad credit will not be buying a house soon. They are more likely to stay in the unit.

Thirdly, the tenant with bad credit will be grateful for the opportunity to rent your unit.  They will need to be monitored more carefully  to make sure they follow through. In other words, no slack. They pay on the 1st.

The people with great credit. I love them. They are welcome. They get the lowest security deposit and for the most part are the easiest. The down side of the great credit people is that they are capable of owning their own home. They tend to rent for a short term and invest in their future long term. Smart!

Some credit reports say STOP, DO NOT RENT TO ME:

1) People who have just plain never paid their bills. These people will have endless collection accounts for small sums of money. You will notice that the problem exists for a long period of time not just a period of unemployment or divorce. Everyone can have a period where they have temporary financial issues but what was their credit like before? What is it like now?

2) People who are older and have no credit. I have had several of these turn out to be false social security numbers. The real social security number would reveal a very bad payer. Both of the previous tenants I had that fell into this category ended up as unlawful detainer cases for non payment of the rent. That is a 100% failure rate!!!!

My decision whether to rent to someone is made on a case by case basis. I look at credit, income and proof of reserves. But the bottom line is always when in doubt, get a bigger security deposit. Another option is a bigger deposit AND advanced payment of the rent. I have had several tenants with bad credit pay 6 months or more in advance. Money in my hand now is always better than money I may or may not be able to collect in the future. The less secure I feel, the more deposit I need.

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