Leasing to a couple with good credit. 3rd person has bad credit.

[juliabennett999]

Washington

Hi everyone,

A couple just applied to a condo I'm leasing that is soon to be available, and both have good credit (680 and 702). They also have income more than 3x the monthly rent. However, there will be a 3rd person living on the premises (a sister) with bad credit. The couple are will be signing the lease and guaranteeing the monthly rent. My lease stipulates that every person living at the residence must apply, hence why the sister filled out the application also.

Is this a red flag that means I should pass on this application? Or is the fact that the couple are the responsible party financially enough to accept them as tenants? I've never had this "mixed" credit issue before so I'd love feedback.

Thoughts and advice would be greatly appreciated!

Thank you...!

 

[quincy]

Washington

Hi everyone,

A couple just applied to a condo I'm leasing that is soon to be available, and both have good credit (680 and 702). They also have income more than 3x the monthly rent. However, there will be a 3rd person living on the premises (a sister) with bad credit. The couple are will be signing the lease and guaranteeing the monthly rent. My lease stipulates that every person living at the residence must apply, hence why the sister filled out the application also.

Is this a red flag that means I should pass on this application? Or is the fact that the couple are the responsible party financially enough to accept them as tenants? I've never had this "mixed" credit issue before so I'd love feedback.

Thoughts and advice would be greatly appreciated!

Thank you...!

Make sure all sign a lease that makes them all responsible for the full rent. If you can't collect from the sister, the couple has to pay.

 

[adjusterjack]

Use the words "jointly and severally" in your lease just to make sure.

680 and 702 is good but marginal. I would want to look at their credit reports, not just their scores. Won't take much to drop them to subprime (below 670) and I'd want to know what's keeping them down now.

 

[Zigner]

Frankly, yours is a business question, not a legal question.

 

[FarmerJ]

AS long as your lease holds ALL parties jointly liable and something happens where the two with better credit move out you don't have to let them out of the lease early but you will have to be more diligent about not waiting if there is a late rent payment and start your states process to evict for non payment ASAP , no wasted time , jump on it. IF the two with better credit follow the lease and give proper notice to not renew then stay on it and waste no time getting #3 out via proper notice and if needed eventually court.

 

[juliabennett999]

Thanks so much for the responses. I didn't realize 680 and 702 were marginal. Can I ask what you'd draw the line at for "good" credit? The minimum I've specified to date is 680.

 

[adjusterjack]

Former landlord here from the days before scores when I obtained complete credit reports and could see the lates, defaults, public records, etc. These days if you want financially secure tenants I would go for 750 and up. Anything less and you're making a risky exception and you should be getting the credit reports because there is something for sure on the reports that's depressing their score.

Maybe their income is 3 times the rent but maybe their debt to income ratio is high and they are drowning in credit card balances. Or they bought a more expensive car than they should have and the payments are eating them alive. Or something else.

If you have a way of getting the full reports, get them. If not, hold out for 750 or better. That's just my two cents worth.

 

[quincy]

I am going to disagree with adjusterjack.

In September of this year, FICO reported that the national average credit score is 704. A good credit score is over 700. Subprime is below 660.

You will eliminate many well-qualified tenants if you limit renting to those with scores over 750. Tenant selection should be based on more than scores. That is only one factor to consider.

I have been a landlord for many years, renting primarily to college students.

 

[adjusterjack]

Tenant selection should be based on more than scores. That is only one factor to consider.

Then you aren't really disagreeing with me as I pointed out pretty much the same thing.

 

[juliabennett999]

Thank you very much. Well, I have been trusting the rating given by the credit and background check company which had said that a previous applicant with 661 was "good." I'm seeing now based on your feedback and doing more research that this really is not the case. The following seems to be a consensus:

Excellent = 750+
Good = 700-749
Fair = 650-699
Poor = 550 - 649
Bad = 550 & Below

I've very lucky in the past that previous tenant credit scores were around 800. Base on what I'm learning here, my absolute minimum should be 700, with a much stronger preference for 750+. Lesson learned.

Quincy, can I ask if would you personally move forward with the tenants I'm considering (credit scores of 702 and 680 for the couple guaranteeing lease payment), or would you pass? Assuming of course I make all tenants jointly responsible. The couple have no negative items on their credit, though they have a high student loan debt combined of $130K.

 

[Zigner]

Yours is STILL not a legal question. You may wish to find a landlord/tenant board to post your questions on.

 

[quincy]

... The couple have no negative items on their credit, though they have a high student loan debt combined of $130K.

I don't consider most student loan debt "bad" debt. Most of my tenants are living on student loans while they attend school.

Again, I consider more than credit scores.

 

[westside]

Yours is STILL not a legal question. You may wish to find a landlord/tenant board to post your questions on.

and you could choose not to particpate in the thread. The OP's questions are just fine where they are, busybodies aside.

 

[quincy]

Then you aren't really disagreeing with me as I pointed out pretty much the same thing.

You're right. I guess I really wasn't disagreeing.

 

[Zigner]

and you could choose not to particpate in the thread. The OP's questions are just fine where they are, busybodies aside.

I'm sorry - if you have a legal question, please start your own thread. Thank you.