Determining If An Applicant Without A Credit History Is The Right Tenant For You

While a rental applicant without a credit history is a bit of a red flag, it doesn't have to be a slammed door.

You'll just want to use a thorough screening approach.

Once you review all of their information, interview them, and take certain precautions, you can determine whether a particular applicant is right for you even if lacking credit history.

Thoroughly Interview the Applicant
As a landlord, you’re allowed to ask questions related to an applicant’s ability to pay their rent.

Questions about their financial history are completely acceptable.

You can also ask how long a tenant plans to stay in your property and how long they’ve stayed in previous properties.

You don’t want a tenant with no credit history to jump ship after just a few months.

While many students and recent grads don’t have a credit history, sometimes you also run into an older individual no credit history.

Don’t immediately leap to conclusions.

Some people are very smart with their money and have decided to live an all-cash lifestyle, and you could be missing out on a great tenant.

Just be sure to ask why they don’t have a credit history, and determine whether their answers hold up.

Check Their Bank Statements
It’s perfectly legal to ask for a tenant’s bank statement.

If a tenant with no credit history has very little money in their account, there’s a good chance you don’t want to take that tenant on.

In other instances, a well-funded bank account might tip the balance in favor of a tenant with no credit history.

Review the statement to determine how much money they’re taking in each month and how much money they’re spending.

You can do a pretty quick financial analysis to determine whether this particular applicant has the means to pay their rent.

In some states, such as California, it’s an applicant’s legal right to deny you access to their bank statement.

However, this might just be the warning sign you need to pull the plug on that particular tenant.

Check Pay Stubs And Consider Going Beyond
You’ll want to request pay stubs from a prospective tenant to ensure they have a job that pays enough.

Often it’s a good idea to not just look at the income-to-rent ratio, but also determine what kind of job they have.

Have they been working there for a long time? Do they work for a large corporation, government entity, or hospital?  Or do they work for a startup business that might go under next week?

For a tenant without a credit history, you want someone who earns enough and also has a job that is generally considered stable.

You might also want to consider filing an IRS Form 4506-T, which allows access to the previous year’s W-2, 1040 or 1099 form. In some cases, applicants can fake a W-2 or pay stub, so taking this extra step can help protect you.

Ask For References
References aren’t always available from someone with no credit history -- yes, some of these individuals are young and your property might be their first rental.

But many applicants without a credit history have rented an apartment or home before, especially while they were attending school. Unfortunately, many private landlords do not report credit histories to credit agencies since it costs money.

Ask the applicant for a reference, and if they have one, ensure that it's positive.

Also consider asking for a job reference.

Make sure that they provide a phone number for their boss, and check the company website to verify that it's an actual company number.

You don’t want to end up calling a friend or family member posing as a boss to give a good reference!

Ultimately, as long as you’re thorough and cover all your bases, you should have a solid idea regarding whether an applicant without a credit history is the tenant for you.

Posted on Jul 06, 2015


The Landlord Tenant Board: What it is and When it is Needed

Many times, there are issues between a landlord and a tenant that need to be resolved but are failed to do so, because both parties have gone too far with their actions, and have retaliated in the... More

How to Review a Rental Application

When it comes to reviewing a rental application, all of it may seem daunting; you will find it overwhelming because there is so much information that you yourself have to go through before the tenant... More

How to Create a Residential Lease Agreement

Where there is a landlord, there will also be a tenant, and it is no surprise that these two parties can only work together once there is some sort of agreement, contract or a binding deal in place.... More

The Best Sites for Rental and Lease Agreement Templates

Many landlords find it difficult to write and draft a lease agreement. Since every State has its own general template, it can also be difficult to make sure your lease agreement meets all the criteria... More

Landlord Obligations: The Responsibilities of a Landlord

Becoming a landlord is a major deal and no one can simply get up and think, “well, yes I think I should be a landlord and rent out my flat.” If you are thinking that you would like to be a landlord,... More

The Best Landlord Associations for Landlords to Join

If you’re a landlord and want to manage your business in a better way, you should endeavor to get in touch with those industry experts who have the experience and the skills to help you do it. This is... More

The Best Landlord Forums

Landlords and aspiring landlords, do not become as such, without guidance and advice. There is a lot that goes into being a landlord nowadays; in fact, there is so much to learn that it often confuses... More

The Biggest Landlord Problems and How to Fix Them

Renting out an apartment or a house can become a constant revenue source for landlords, but at the same time, it gives rise to several problems. It is a fact that high standards, a strict lease... More

Landlord Tenant Disputes

If you are currently thinking of becoming a landlord only because it helps you have a constant stream of income, you should think twice. It’s not that you should not consider offering your property... More

Prospective Tenants

In case you’re going to establish a new landlord tenant relationship, it is important that you proceed with extreme care. Though it is a good idea to offer your property for rent and make some money,... More