Accept Low Credit Score Rental Applicant Tip
Rose's comment: Inquiring about accepting very low credit scores. Other folks that are watching my videos, if they would ever consider accepting a very low credit score.
I want to accept a credit score too low, but there is one option, and that would be what we at the property management company called a risk mitigation fee. We're not going to go extremely low. The problem is, a low credit score could be a sign of someone who makes bad decisions or someone who doesn't pay their debts.
When we're looking at a credit application, we want to see that you have some credit, that you've been using credit and you've been paying that credit. It doesn't really matter how much money you're making or how little you're making, as long as you have always historically made paying your bills a priority. People are always going to pay their cell phone bill, car payment, and even their credit cards before they're going to pay their rent. Usually, the rent kind of comes in last, so make sure that folks just kind of are doing good decisions.
But again, back to the question: would we accept? We will accept a lower than optimal credit scores, but we employ risk medication fees, and it's really imperative that you treat all tenants identically. Basically, go through the criteria and have it that your credit score is between 600- 650, you're going to have to pay an additional amount of a risk mitigation fee. However you want to document that information, always put that in writing, and make sure each and every tenant coming in is aware of that policy. You want to avoid violations with the Fair Housing violations and be very fair across the board.
It's important to engage a risk mitigation fee to offset some of the risk. So if somebody is paying you an extra $15 a month, times that by a year, you're basically going to offset some of the cost of a potential eviction if that kind of comes your way or other kinds of problem you may encounter.
This is Joe White trying to answer your real estate investing questions. Good luck!!!