The fact is, about 85% of America has a credit score above 600. At 600, you start to get below a 50% default rate on mortgages, and an even higher default on rents. Remember, you are not looking for an average renter for your quality unit; you want a quality renter for your quality unit.
If you are running a bare-bones, slumlord operation, you need to specialize on the sub-600 renters, not avoid them. Some landlords would say avoid anyone with a sub-700 credit score. Every person can be a good renter, in the right residence. Know why you have tenant selection criteria, in addition to having the criteria in the first place.
Remember, land lording is a game of probabilities and statistics. There are good tenants in every category, but you are looking for the highest probability of success, not the needle in a haystack. Success is defined a tenant that pays rent, leaves the unit in good order, and you make money. Making money (or not losing more than planned) is a key factor.
So a tenant with a sub-600 score can be great, but you MUST mitigate your risk with a higher deposit and a stronger criminal, rental history and employment background, including rent to income ratio.
Sure, and 800 credit score can have problems too, but statistically they are less likely.
A foreclosure will ding a credit score 100-150 points, leaving many people with a 600+ credit score. It takes work to get below 600.
So do yourself a favor. Do what it takes to get a higher credit score person. Even a Section 8 tenant can have a 800+ credit score. Credit score is a responsibility indicator, not a income indicator or public assistance indicator.
Be sure to look at my “Coming Attractions” page and see what I have in store for upcoming articles.
What is your tenant selection criteria?