Why is my Renters Credit Score different?

The difference in a renters credit score, and the one you get is this.  Many background check companies, such as mcccgrp.com, use a true FICO score, developed by Fair Isaac Corporation (FICO).   If you are gong to be a successful landlord, you need to understand the relationship between tenant performance and credit score.

It is a proprietary score, only issued by FICO.  It relies on information from the credit reporting agencies, Experian, Transunion and Equifax.  This is the official FICO score.  It is the one lenders use.  It costs money to get it, and it is probably the most expensive score.  The FICO score ranges from 300 to 850.

NEVER, EVER, use the tenants own score to make a decision on whether or not to accept them.  Use your own credit score source.  It will be consistent, it will be fair across all renters, and it will not be a fake one.

When FICO creates a score, it is based on the inputs from the three different credit reporting agencies, Experian, Transunion and Equifax.  Creditors send information to one or more of these three agencies on different timeframes.  Ford Finance might send information to two of the three agencies on the 15th of the month.  US Bank might send to only one agency on the 20th.  Visa might send to two different agencies, to one on the 5th and to the other on the 25th.  Bank of America might send daily updates.

Since creditors send their information to one or more of the three agencies on different schedules, on any given day the renters credit score could be slightly different.  Each agency could have potentially different information that they gather up and send to FICO to calculate a score.

If it was possible for all of the credit reporting agencies to have the identical information, FICO would generate the identical score for Experian, Transunion and Equifax.

The scores many tenants have are ‘Plus’ or ‘Vantage’ scores.  The three credit agencies have developed their scoring method.  Experian has a PLUS score.  Transunion has a Vantage score.  Equifax has their score.  They sell these scores to people who want to know what their credit score is.  It is a different score than FICO, it is more of a FICO credit score predictor.  The Credit reporting agencies have a vested interest in providing a score, not a ‘no score’ as FICO might have.  They have their own criteria.  Their scores could be higher, or lower.

So, when the tenants ‘buy’ a score from a different source than the score you ‘bought’ it will likely be different.  They are two entirely different scores, calculated by different algorithms, by two entirely different companies, on two different dates.

You as a landlord care about credit score because of its ability to predict personal behaviors and its ability to predict future payments.  It is a color blind indicator.

People with low or no credit scores are a higher risk to your building and to other tenants.  Most landlords are running a business, not a homeless shelter.  Lower credit scores mean less profitability.  Drug dealers, pimps, prostitutes, money launderers and the like, deal with cash, and often have no credit score.  They have friends that are like them, which is also a bad deal.  Even their relatives that hang around them often have unsavory pasts.

Not every criminal has a criminal record.  Criminals fool the legal system on a regular basis, but criminals have a hard time fooling the financial industry.

Have you ever wondered about this?  Have you ever had a tenant argue that their score was different that the one you came up with?

8 Replies to “Why is my Renters Credit Score different?”

  1. So as a Landlord,you portray those of us who have lower credit scores,as pimps,prostitutes and so forth.Well,I have news for you people fall on hard times and sometimes because of unemployment,sickness,or full time caregiving responsibilities,their credit scores take a dip.I am in none of those groups you mentioned,and in fact have a college degree.I took care of my Stepfather for years.Credit bureaus are unforgiving,and it can take years to raise one’s scores despite paying bills on time,especially if you are also paying off a student loan.I suggest you do some research,instead of posting erroneous information.

    1. Thank you for the comment!

      You are correct; there are many people out there with bad credit that are good people. The secret to successful landlording is making sure the tenants hard times do not become the landlords. With that said, I advise people to stay away from low credit score people as they are a higher risk.

      Keeping a tenant on a month-to-month lease, having a higher deposit, and a higher rent helps to mitigate the risk.

      With the average renters credit score ~658, anything below 658 is below average. So, requiring a 625 or so is not that bad. Lower credit scores also have a tendency to have more insurance claims and other personal behavior issues.

      A landlord should also have consistent tenant selection criteria and not be subjective. A credit score is a great way to avoid issues with the Fair Housing Act. Everyone is treated the same.

      I stand by my statements.

  2. Your immediately equating a low credit score with pimps and drug dealers? I feel for anyone taking advice from this column.

    1. Thank you for the comment!

      Unfortunately, you do not get the correlation. Just because pimps and drug dealers will likely have a low credit score (or no score), it does not mean that everyone with a low credit score is a drug dealer or pimp. However, everyone with a low credit score, or no score, is high risk to a landlord. I stay away from them, and advise others to do the same. This is a blog about maximizing landlord profits, not giving out handouts.

      Bad credit means the person with the bad credit doesn’t pay their bills. A rent invoice is another bill to a tenant. Why would a low score person have just as high of a chance of paying as a high score tenant?

      Complying with the Fair Housing Act is also a mandatory responsibility of being a landlord. Treat everyone the same in regards to qualifying as a renter. Using a credit score fulfills this requirement. It is the same measurement for everyone; Race, income, religious affiliation, marital status, etc. criminal record are not used as a factor in the score. 100 people, looking at the score and criteria, should be able to come up with the same result.

      Credit score is also directly associated with the business aspect of being a landlord. It is not a made up criteria, such as a messy car, to exclude a renter.

      Your implied advice of disregarding credit score is a disaster in the making. I can only assume you do not have any rentals… Your attitude does underscore the importance of tenant screening, it helps to screen people such as yourself that have a entitlement mentality.

  3. “Bad credit means the person with the bad credit doesn’t pay their bills”

    No, it doesnt. You can have a very low score from high utilization, many inquiries, or too much new credit (age is low). My score is not great and I have zero lates or collections. I pay my bills. Many times bad credit is for unpaid bills but its not universally true. Utilization simply means I fell on hard times and had to use my credit cards more than I should and am carrying a balance. I pay them each month well before the due date. I am not saying these are good things but the statement made is not always correct. At least with regard to score calculations

    1. Thank you for reading. I have seen a 585 with only once late payment of 30 days and a high debt to available credit. The only scores under 550 I have experienced were deadbeats. You are the exception, what was your score?

      1. My FICO says its 660. My Vantage was 585 (both from TU). I think Vantage punishes even more for utilization and also only factors average age of open accounts whereas FICO seems to factor overall age of accounts. Either way, I have no “baddies” or lates on my CR and still its fair at best.

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