STRATEGY
CREDIT SCORING
Placing Tenants with “Thin” or No Credit AS CREDIT-SCORING CHANGES, LANDLORDS MAY FIND THEMSELVES IN THE DARK.
by Carole VanSickle Ellis
ost landlords consider working with tenants with less-than-perfect credit part of the job description, particularly when interest rates are low and a higher proportion of high-credit individuals are opting to buy. Tenants with less-than-stellar credit but a high motivation to pay rent on time and remain in place for the long haul can be great residents, making identifying and accepting their applications a profit- able strategy. However, with increasingly limited information available (for example, some cities now prohibit criminal background checks and certain scoring), landlords find themselves increasingly reliant on proof-of-income and traditional credit scores to make predictions about their applicants. “When you remove certain components from any type of score, that score becomes a little less comprehensive,” explained Tyler Sawyer, vice president of rentals & real estate at Equifax. “That hurts M types of unpaid debts are no longer permissible in credit
the applicant and it hurts the landlord because it makes that potential resident appear to be a bigger risk, on paper, than they actually are.” “When our clients encounter thin credit reports, we recommend they try to determine, within the bounds of local regulations, other forms of stability in an applicant’s life,” said Linda Liber- atore, president of Secure Pay One, a web-based rental management company serving active landlords nationwide. “You might verify not just income but also time-on-job, how long they spent at their last apartment, and how many line items in their credit history have been paid off. In some cases, landlords will even ask for up to six months of check- ing account statements to get an idea about spending patterns, but you need to check with a legal advisor before requesting that,” she added. “Remember, utility bills and cellphone payments may not appear on credit scoring analyses,” Sawyer pointed out, noting Equi- fax works closely with data-management firms to try to “flesh out” thin reports with this type of information.
They say success in business depends on who you know, and it’s certainly true in real estate. Private Money Lending Guide is here to help you build relationships with private money lenders who specialize in real estate investments, so you can take your business to the next level. BUILD RELATIONSHIPS WITH PRIVATE LENDERS.
“To be truly useful, a credit report needs to be about a lot more than just a payment cycle and whether you paid your major credit cards. For a landlord’s purposes, it needs to be about whether you pay reliably on things that are most important to you, which usually include utilities, rent, and cell phones or car payments,” Sawyer said. • A note fromThink Realty: Renters’ and landlords’ rights and associated legislation and regulations vary widely from state to state and even city to city. Work with a locally informed professional to make sure your practices meet code in each market where you screen potential tenants.
Tap into educational resources to help you better understand the private lender requirements.
Access our free nationwide directory with direct access to private lenders.
Find the right private lender for your deal using our search functionality and search by loan amount, state, and loan type.
Tyler Sawyer is the vice president of rentals & real estate at Equifax. Learn more about credit scoring and solutions by emailing wyatt.jefferies@equifax.com.
Build beneficial relationships with private lenders for your next real estate investment project!
Linda Liberatore is the president of Secure Pay One. Reach her at lindal@securepayone.com.
START TODAY AT PRIVATEMONEYLENDINGGUIDE.COM
30 | think realty magazine :: august 2018
thinkrealty . com | 31
Made with FlippingBook flipbook maker