There really is no set rule for what makes a perfect tenant. Sometimes those with a seemingly spotless profile turn out to be problematic in terms of attitude or fulfilling tenant responsibilities. Other times those with a poor credit record maligning their application may be exactly what you are looking for in a tenant.
Don’t turn away a candidate based only on their credit record. A bad credit record does not equate to a bad tenant. Sure it is indicative of the fact that the tenant may struggle to pay rent on time, but there are ways to counter that risk. Here are five ways to minimize risk when renting to tenants with poor credit.
Communicate Your Reservations with the Tenant
We always suggest filtering out your applicants, and the credit score is one way to do so. However, there are multiple reasons why a tenant may have a poor credit score, and not all of them are indicative of a tenant’s current condition or ability to pay bills.
Before you reject a tenant, ask them the reason for the poor credit score and discuss your reservations with them. Together you two can come up with a solution that can minimize risk for you without becoming a burden for the tenant.
Ask for Proof of Income
It is always better to be safe than sorry. Always ask a potential tenant with a bad credit score for proof of income, especially if they have a history of being unable to pay bills or rent on time. If the tenant doesn’t have a stable job, then you will have to take some extra security measures to ensure you don’t end up waiting for rent each month. Remember to be considerate but not careless.
Ask for a Cosigner
The cosigner will be your guarantor, that in case the tenant is unable to pay rent, the cosigner agrees to take the responsibility of paying the rent on the tenant’s behalf. It is a viable option for first-time renters or college students who often struggle to keep up with bills and rents. Make sure the cosigner is financially stable to ensure you get your rent on time.
Sign a Shorter Lease
A shorter lease term will help you get an idea of how capable the tenant is of keeping up with rent payment. If they turn out to be problematic tenants, you can refuse to renew the lease instead of going through the eviction procedure.
Higher Security Deposit
A security deposit can help you cover up unpaid rent. The problem here is that there are limitations on the amount of deposit you can charge a new tenant in some states. You cannot charge a tenant for more than two months’ rent in terms of a security deposit by law. However, you should never really let a tenant fall behind on their rent for the second consecutive month, so charging them the maximum amount should be enough to minimize the risk.
There are countless other ways to minimize risk when renting to tenants with poor credit. We have tried to cover the ones that are the simplest and easiest to do. Who knows, you may end up finding the ideal tenant in someone with a poor credit record.