How to Verify That a Renter Is Trustworthy When They Have No Credit History

If you're only renting units or homes to tenants with an excellent credit history, you might be waiting a while before you get an acceptable application. While it's true that a good credit history normally equals timely payments, that's not always the case. There are many potential renters out there who haven't yet had the opportunity to boost their credit score; they're simply too young or too financially inexperienced to have any credit history worth mentioning. Others may have flaws on their credit, but they've managed to bounce back from a rough patch and will be ideal renters in the future. But how can you tell these renters apart from the troublesome ones? There are a few ways to check a person's trustworthiness, even without a credit history.

1. Ask for old payment records.
Oftentimes, even if a person has no credit history to speak of, they still have some form of past financial obligations that can vouch for their reliability. You can ask them to provide these records as proof of their timely payment history. It's best, of course, to ask for old rent payment history from past landlords, but that's not always an option. In that case, any bill payment records will work. Even a utility bill record will give you a good indication of a potential tenant's past.

2. Ask for a large down payment.
If you're still worried about the tenant paying on time each month, ask them for a larger down payment up front. Because it's difficult to rent without a credit history, most tenants will gladly put extra money down to secure a rental. Many landlords use this money as a security deposit or apply it to the last month's rent in the lease agreement. Be sure and check local law regarding a large down payment.

3. Ask for references from past employers.
Regardless of credit history, you should always make sure your tenant has verifiable income. You should verify employment with his or her current company, and you should also ask for references from past employers. Legally, the questions you may ask employers may be limited, but you can usually ask if the applicant is eligible for rehire, which will give you a good indication of his or her prior work performance. You don't want a renter who is fired repeatedly from different jobs.

4. Ask for character references.
Since employers can't give out much information about the tenant's character, ask applicants for additional references to vouch for their dependability. These shouldn't be family members, though. If possible, it's best if references are honest people whose names you recognize in the community. If that's not possible, friends, past or present coworkers, teachers, or other professional acquaintances are always good options.

5. Verify their income.
There are several ways to verify a tenant's income, and you should pursue at least one of them. You can ask for past pay stubs or old tax records, such as W-2s or 1099s. You can also request bank statement records. Of course, their employer can also verify their income through an employment verification request.
Once you're satisfied that the prospective tenant is honest and reliable, there's nothing holding you back from extending a lease agreement offer to them. As long as you verify their history, income and character, you'll likely have an excellent renter with little to no problems in the future.

POSTED June 19 2015 3:00 PM

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