Placing a new tenant in your rental comes with some preparation. Before you can allow anyone to rent from you, you’re going to do your due diligence and screen your tenant, which will likely include a background check, credit check, and rental history summary. A good credit score is one of the best signs of a great tenant, so understanding the renter’s credit score is important. Is 650 a good credit score? How different is a 670 credit score from a 690 credit score? Here’s how to find and analyze a rental applicant’s score and understand what the numbers actually mean.
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1. Run a credit check
You’ve met your potential tenant and they’ve filled out their rental application; now comes the time to check their credit history. With Zumper’s tools, you have the option to either cover the cost of the screening and credit check or make it the renter’s responsibility. Whichever route you choose, the credit check will be powered by TransUnion, a leader in the space. Simply email the screening link to your potential tenant and they can enter their information for the credit check. Be sure to keep these 7 things in mind when screening a tenant.
2. Understand how factors are weighed
Once you receive the results of the credit check, you’ll want to dive into the numbers. First, though, let’s take a look at how we arrive at the actual number. The picture below shows how each contributing factor is weighed in a renter’s credit score:
You can see that a renter’s payment history is the main contributor to their credit score. It’s likely also the factor that will affect you the most, too. Does this potential tenant constantly make late credit card payments? If so, they might also be late on rent payments.
The amounts owed is also an important factor to consider as a landlord. Renters may have a low credit score because they make incremental payments as opposed to paying purchase off in full. Think about how much you charge for rent and make sure it’s doable for the renter.
3. Know what a good credit score is
VantageScore 3.0 and FICO 8 are the most commonly used scoring scales. They use a scale of 300-850. Earlier we mentioned a 650 credit score and where it fell in the scoring range. Below is a color-coded scale showing how each score range stacks up. A credit score of 650, as you’ll see is considered on the lowest end of “fair,” and bordering on “poor.”
We also posed the question of how 670 credit score differs from a 690 credit score. As you can see in the scale, they both fall in the “fair” category. Any score above 700 is considered “good,” and anything above 750 is “very good”. An excellent credit score is quite difficult to achieve, but anything above 800 will give that scoring.
4. Have a conversation with the applicant
Consider your renter’s credit score and determine if their number is something you can work with. If you’re having doubts or questions, don’t hesitate to sit down with the potential renter and discuss their current financial situation. It may be that some bad luck, a family emergency, or any number of other factors contributed to their credit score. Perhaps they’re in a better place now and are ready to find an apartment despite their bad credit.
Communication is a major part of creating a good landlord-tenant relationship, so having an honest conversation about their financial situation and being open to hearing them out is a great start. Take the time to read through the renter’s credit check, understand how the score is weighed, and talk openly with your potential tenant. You’ll have your ideal tenant in no time.
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