Renters ... we, the landlords, need them because without them our business has little purpose. Having performed hundreds of analytical exercises over years, I must say that the mindset of a tenant vs. that of a homeowner is phenomenally different on the aggregate. Even at the same Beacon score, renters will go bad (miss payments on their credit cards, loans, and yes .. rent) 3 to 4 times more often than homeowners.
So what do you do when your prospective tenant does not have credit history? The bureau tells you the file does not exist. Do you just approve them, and miss a very important piece of information about them? Or decline them all and risk running your unit vacant?
Here is a Stability strategy I use:
- minimum 2 years at their last address
- minimum 2 years at their last job
- rent to income ratio no more than 35-40% (hey, they don't have any other debt )
- favourable review from their present landlord
In some cases their credit file does exist, but it is "thin", i.e. there is nothing there but inquiries or public records, and no Beacon score. If you see Bankruptcy, Collection Item, Judgment, Tax Default - enter at your own risk! If they have more than 5 inquiries in the last 6 months, beware of Credit Seekers! Otherwise, using the Stability strategy above it is possible to select very descent tenants!!
After all, it is possible that no credit is better than bad credit!
Oleg Pereslegin
[email protected]
www.realestateriskmanager.ca
So what do you do when your prospective tenant does not have credit history? The bureau tells you the file does not exist. Do you just approve them, and miss a very important piece of information about them? Or decline them all and risk running your unit vacant?
Here is a Stability strategy I use:
- minimum 2 years at their last address
- minimum 2 years at their last job
- rent to income ratio no more than 35-40% (hey, they don't have any other debt )
- favourable review from their present landlord
In some cases their credit file does exist, but it is "thin", i.e. there is nothing there but inquiries or public records, and no Beacon score. If you see Bankruptcy, Collection Item, Judgment, Tax Default - enter at your own risk! If they have more than 5 inquiries in the last 6 months, beware of Credit Seekers! Otherwise, using the Stability strategy above it is possible to select very descent tenants!!
After all, it is possible that no credit is better than bad credit!
Oleg Pereslegin
[email protected]
www.realestateriskmanager.ca