Hello World! Welcome Friends! At first glance, renting a place to someone seems like an easy thing to do. After all, you’re simply helping other people find a place to live while earning some form of income at the same time.
But in reality, renting can be a challenge because finding the perfect tenant for your place is like finding a needle in a haystack.
Luckily, the credit report is here to help you out.
The Credit Report: How Helpful Is It?
Essentially, the credit report helps renters vet their possible tenants. The credit report shows each tenant’s credit score, and that score will help determine if a tenant is a good or bad credit risk for the renter.
Case in point: if a possible tenant has a bad credit score, which is usually below 600, it might mean that they don’t pay bills, or that even if they do, it’s usually past the due date. It might also mean that this person has debt, and you can also assume that they will have trouble paying you rent. As a result, you’re probably better off without this tenant.
However, studies have shown that around 68% of Americans have impaired credit before they turn 30, so if you reject every possible tenant with a bad credit score, then your property will end up empty, and you won’t earn any income.
So, at the end of the day, you have to rent your property to at least one person with bad credit.You may check the bad tenants list too, to make sure you’re not renting to someone who has a history of evictions or causing damage to rental properties. This list is often available through local housing authorities or tenant screening services.
But how do you deal with renting a place to a tenant with a bad credit score? Here are some words of advice specifically for you.
Tips for Renting to an Applicant with Bad Credit
Communicate with the Applicant
When dealing with disputes with other people, communication is always crucial. So, if you have any reservations for a particular applicant due to their horrible credit score, apartment locators from UMoveFree advise that you make an effort to talk to them about it.
Try to ask about why their credit score is low or why they have a high credit card debt. Maybe they have understandable reasons for their credit fumbles — like, they perhaps encountered a medical emergency the year before, etc. — and they’re working hard to rectify their mistakes.
Some applicants may even provide some form of insurance that they will pay rent on time, and this can ease your worries.
Long story short, talking with an applicant will help you see their point of view and understand where they’re coming from. Just make sure that you’re polite and respectful when asking the questions.
Ask for Paychecks, Proof of Funds, and Past Rent Receipts
If you’re still unsure if an applicant is a right fit for you, you may request more proof from them that they’ll be able to cover rent payments.
The “proof” may come in several forms. It can be paychecks from last year — to make sure that the applicant does have a stable job with a steady income. Or it can be bank statements — to see if they have enough savings to pay for rent.
You can also ask for the past rent receipts if they have them. You can even request a landlord reference letter. With all of this, you’ll be able to see if the applicant was able to pay on time, and you can make your assumptions on how they will pay the rent to you.
Requesting some form of proof that the applicant is capable of paying rent helps you weed out the wrong tenants.
Ask the Tenant to Have a Co-Signer with Them
If you want a strong guarantee that you will get the rent payment from a tenant with bad credit, then you might want to ask that tenant to have a co-signer with them.
Essentially, a co-signer, also known as a guarantor, is the person who has to pay the rent if the tenant won’t be able to do so. If they also fail to fulfill the lease obligations, they might suffer dire consequences to their credit record.
As such, you should ensure to screen the co-signer so that you know for sure that they’re financially stable.
Request for a Higher Security Deposit
Now, this tip is a tricky and controversial one, simply because asking for a security deposit that’s higher than rent for one month is not legal in a few states. So, before you follow through with this advice, you should check your state’s mandated limits first.
If your state allows for a higher security deposit, then you should do so — so long as you don’t go beyond the legal limit. If you do this, you lessen the risk of making a person with bad credit your tenant.
Cut Down the Term of the Lease
If you don’t like to do the advice above, then another option you can go for is to cut down the lease term.
For example, your typical lease lasts for one year, but for a tenant with bad credit, you can change this lease to quarterly or monthly. Doing this allows you to close the tenancy period early if you encounter constant problems with the tenant.
Ask Your Tenant to Pay Their Rent Through Direct Debit
The best way to ensure that you will receive rent payment on time is to choose applicants who have reliable incomes and bank accounts.
This is because if your tenant has a reliable income and bank account, you can ask for direct debit to ensure that their rent is paid fully and on time.
Conclusion
Finding the right tenants for your property is a tedious task, and it becomes even more tedious when a good number of your applicants have bad credit scores. Luckily, there are ways to work with tenants with bad credit, and the suggestions above are some of the best ones.
Follow through all the advice, and you’ll be good to go.
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