What do property managers and landlords look for when they choose new tenants?
Knowing could make a big difference in which rental home or apartment you live next.
A recent TransUnion study revealed that one (1) in two (2) landlords said that the results of a credit check were among the top three (3) factors used when deciding which lease application would be accepted. TransUnion is one of the three (3) major consumer credit reporting companies. TransUnion provides credit reports customized especially for landlords.
The availability of online credit checks and the increased demand for residential rentals combine to put increasing pressure on potential tenants to stand out from the crowd. In other words, landlords no longer need to blindly accept anyone to fill their vacancy.
For many would-be renters, credit scores are mysterious
Rental applicants usually know if they have good, bad or id they have no credit score at all. Other than that, most potential tenants have no idea what a credit score means when it comes to rental applications. In fact, many potential tenants have never actually looked at their credit report. All they know is what CreditKarma tell them or information from some other free credit score website.
Because a credit report contains volumes of “mysterious” information, many would be renters wonder what credit factors really matter to professional landlords. What do property manager scrutinize?
Before we continue, you should know that property managers work for the property owners, not you. Their job is to rent and maintain the property and return the best possible return to the owner. If the landlord is managing his own property, it is his business. He is looking to make a profit on the hundreds of thousands of dollars or even millions of dollars he invested in a house or apartment building.
Neither the property manager nor the landlord is obligated to provide you with living accommodations, act accordingly. Be respectful and make your finances look attractive without lying. A good property manager can smell a liar when he walks in the door.
Property managers and landlords do not look for perfect credit. If they did they would rarely find tenants. They know that if you had a fabulous credit score and a few dollars in the bank, you would probably be a homeowner and not a renter. They also understand small mistakes and medical bills. Regardless, there are things that cause regular rejections of lease applications. The following is a list of factors property managers and landlords consider when evaluating a credit report:
Property managers generally target certain FICO scores for each property they rent. However, that target score often slides one way or the other depending how long the property is vacant. Lower scores are accepted for less desirable rentals while higher scores are demanded for upscale, more desirable and expensive units.
The general rule for the industry is that the lessor’s gross monthly income should be three (3) times the amount of the monthly rent payment. (Gross income is your income before taxes.) In most cases, this rule is written in stone, especially if the property you want is run by a management company. HINT: There are more than four (4) weeks in a month. Accordingly, if you are paid weekly you get more than four (4) paychecks in a month. If you are paid bi weekly, you get more than two (2) paychecks in a month. So, if your gross income is close to three (3) times the rent, but not quite there, the extra four (4) days in a month could make all the difference.
The Credit Monkey works with a property management company that will not rent to anyone who has been evicted within three (3) years of an application regardless of credit score. They believe that it takes three (3) years to sufficiently change someone’s financial circumstances to make an evicted renter a solid tenant. To them, that is another one of the hard and fast rules. Other property managers may use another period of time. When in doubt, ask.
Recent Bankruptcies or Undischarged Bankruptcy
An undischarged or even a recently discharged bankruptcy could indicate financial instability which throws up a red flag to property managers. Even though your Chapter 7 bankruptcy gave you a fresh start, don’t be surprised if it is the reason for your application denial.
Judgments that can be collected by wage garnishment can affect a tenant’s ability to pay his rent. Therefore, if you have an outstanding judgment against you, be prepared for your rental application to be rejected.
Utilities in Collections
This is a big one. If you walk away from a large electric bill at former apartment, you may do it again at your next apartment. In many states, if a tenant walks away from a utility bill the property owner is responsible for that bill. Furthermore, in some locales, utilities providers blackmail property owners into paying the former tenant’s outstanding bill by refusing to turn on the electric, gas or water for the new renter until the old bill is paid. In the case of utilities in collections, sob stories won’t work. Professional have heard them all. Make an arrangement to get that bill out of collections. Paid delinquent bills are not in collections. They are only black marks on your credit.
Recent charge-offs or repossessions show lack of financial stability and or lack of financial responsibility. A potential landlord doesn’t want to be the next person to write off a bad debt. If he has concerns, you will be declined.
Felony and drug convictions, regardless of how minor, will haunt you for many years. A conversation about your past with the property manager can save you untold aggravation and embarrassment.
If you’re worried about what a potential landlord or property manager might find on your credit report, get your credit report before applying for a rental. See what he sees so you both can have an honest conversation. Tell your story so he will know more about you than what he sees on your credit report.
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