Landlords come across all manner of people when screening prospective tenants.
It's necessary to look a variety of factors to find out who is most likely to pay rent on time and take good care of the property.
This is challenging when you've got an otherwise stellar candidate who has no credit.
Fortunately, there are several screening alternatives available that will help you predict if an applicant will make a great tenant.
Assess Prior Rental History
When a prospective tenant doesn't have any credit, begin the screening process with their rental history.
After all, their rental history shows more about their ability to pay rent than their credit rating.
An individual could have bad credit, for instance, simply due to medical bills.
This doesn't mean that they haven't always paid rent on time.
With this in mind, a landlord need only ask for a potential tenant's three prior addresses and their landlords' contact information.
You should contact at least their last two landlords to see if there were any problems.
There are a variety of questions you may be interested in asking, but the following are imperative to ask in every situation:
- Did the tenant always pay rent, or did they leave owing money?
- Did the tenant always pay rent in a timely manner?
- Was the property well cared for?
- Would the landlord rent from this specific tenant again if given the chance?
Some of these questions could be make-or-break.
Some of the questions, though, such as rent being paid on time, should be delved into further.
If the individual was late on rent once or twice, for instance, did they always alert the landlord ahead of time?
Did they complain at all about the late fee?
The answers to these questions are indicative of whether the tenant is worth renting to.
Look at Your Applicant's Bank Statements
After screening an applicant's rental history, take a look at their bank statement.
A lack of credit could simply mean that an individual has always chosen to pay their bills up front.
Check to ensure that they have enough money to cover at least two months of rental payments. Ideally, they should have enough to cover six months of rent.
While asking for a person's bank statements may seem awkward, remember that you are going out of your way to help them prove their rental worthiness.
To avoid any seemingly graceless moments asking for this, however, it's simple to just add the question "If asked, can you provide X months of bank statements?"
This way, a prospective tenant can decide in the early goings whether or not they're willing to do this.
Check Out Their Employment History
Even in the absence of credit history or bank statements, you can make a relatively sound decision on a tenant by looking at their employment records.
It's important to verify that their employment and income, which should be more than triple their rent.
Ask for recent pay stubs or an employment contract and how long they've been at their current job.
If they're prone to getting fired or resigning, they may not have enough income in the future to pay rent.
Since you're taking more of a chance with tenants who have no credit history, it's important to be thorough when verifying employment.
Contacting an applicant's employer and asking them the following questions can help ensure that they're gainfully employed.
- "Is this person employed here?" Make sure to verify the company and phone number provided in the phone book. This prevents a prospective tenant from simply providing their buddy's cell number.
- "Is the income information the employee provided accurate?" Not all employers will answer this, but it doesn't hurt to verify information listed on pay stubs or W2 forms.
- "Are prospects for long-term employment good?" Once again, employers may not want to vocalize an individual's chances of being at the company long term, but it doesn't hurt to ask.
While a lack of credit history makes your decision more difficult, it shouldn't be an automatic disqualifier.
With careful screening, you can feel confident in your choice of tenant.
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