If Evictions Destroy Many Residents’ Credit Who Will You Rent To?

The entire country is currently very sick of commercials with sad face emojis and pouting voices all themed around saying “during these unprecedented times.” It’s all well and good to have a support system but if one more advertisement promises that now is a great time to buy a car because this one brand understands the world is changing but hey, look at this cool car, well, there will be more than one smashed phone screen.

The entire country is currently very sick of commercials with sad face emojis and pouting voices all themed around saying “during these unprecedented times.” It’s all well and good to have a support system but if one more advertisement promises that now is a great time to buy a car because this one brand understands the world is changing but hey, look at this cool car, well, there will be more than one smashed phone screen.

This is all incredibly irritating because no, now is not a good time to buy a car, which explains why some companies sneakily unlisted their ad campaigns. It’s one thing to remind people that hey, you can get your pizza delivered, and another to suggest restructuring their entire insurance policies or booking plane tickets for the fun of it. Even without mentioning a pandemic, it’s important to know that a recession, if not here already, is coming. In fact, most landlords and rental housing pros already know it’s here.

Unemployment numbers hit record highs this year. According to the Bureau of Labor Statistics, only a handful of record highs in the states weren’t set this year, leaving well over 40 of the remaining record highs across the United States blown to pieces just over the last few months. People are struggling. People are scared. People are hurting. Because of all this, the rental housing industry has come to a screeching halt.

This is all incredibly irritating because no, now is not a good time to buy a car, which explains why some companies sneakily unlisted their ad campaigns. It’s one thing to remind people that hey, you can get your pizza delivered, and another to suggest restructuring their entire insurance policies or booking plane tickets for the fun of it. Even without mentioning a pandemic, it’s important to know that a recession, if not here already, is coming. In fact, most landlords and rental housing pros already know it’s here.

Unemployment numbers hit record highs this year. According to the Bureau of Labor Statistics, only a handful of record highs in the states weren’t set this year, leaving well over 40 of the remaining record highs across the United States blown to pieces just over the last few months. People are struggling. People are scared. People are hurting. Because of all this, the rental housing industry has come to a screeching halt.

Residents can’t pay their rent and property managers and owners can’t evict their renters. Therefore, some owners can’t pay their bills and other properties are hurting financially. As for states where eviction courts are opening back up, there is a tsunami of eviction filings to deal with and renters looking for their next place to stay.

The next vacancy you try to fill will be different from the one prior to all of the 2020 Madness. There is a very good chance that the applicants you get will not meet all your standard markers of ‘Very Good Applicant – Accepted!’ Evictions will hit them hard, the high unemployment rates even harder. Your current residents who have managed to scrape by may not be fairing any easier. So, what do you do when your applicants have bad credit?

Residents can’t pay their rent and property managers and owners can’t evict their renters. Therefore, some owners can’t pay their bills and other properties are hurting financially. As for states where eviction courts are opening back up, there is a tsunami of eviction filings to deal with and renters looking for their next place to stay.

The next vacancy you try to fill will be different from the one prior to all of the 2020 Madness. There is a very good chance that the applicants you get will not meet all your standard markers of ‘Very Good Applicant – Accepted!’ Evictions will hit them hard, the high unemployment rates even harder. Your current residents who have managed to scrape by may not be fairing any easier. So, what do you do when your applicants have bad credit?

If you’re good at compartmentalizing, congratulations, that skill will be very useful here. It is perfectly reasonable to want renters with good credit scores The credit score system allows professionals like yourself to make educated and informed decisions as to who is the most qualified applicant for you to take a financial risk on. Generally, you want to rent to the people with the lowest amount of financial risk to you!

Malcolm Gladwell fans may know what’s coming here. 2020 is an Outlier, a “statistical observation that is markedly different in value from the others of the sample.” While Outliers: A Story of Success is a predominately wishy-washy version of how to be successful in both a pessimistic view and optimistic, depending on your point of view, his point still does apply.

Things that have happened in 2020 need to be viewed under a different lens. What can you see as an outlier?

If you’re good at compartmentalizing, congratulations, that skill will be very useful here. It is perfectly reasonable to want renters with good credit scores The credit score system allows professionals like yourself to make educated and informed decisions as to who is the most qualified applicant for you to take a financial risk on. Generally, you want to rent to the people with the lowest amount of financial risk to you!

Malcolm Gladwell fans may know what’s coming here. 2020 is an Outlier, a “statistical observation that is markedly different in value from the others of the sample.” While Outliers: A Story of Success is a predominately wishy-washy version of how to be successful in both a pessimistic view and optimistic, depending on your point of view, his point still does apply.

Things that have happened in 2020 need to be viewed under a different lens. What can you see as an outlier?

  • There is only one eviction on their record and it is from 2020.
  • They held long term employment positions up until 2020 but have since lost their jobs.
  • Their credit score took a recent hit due to an eviction or job loss.
  • There is only one eviction on their record and it is from 2020.
  • They held long term employment positions up until 2020 but have since lost their jobs.
  • Their credit score took a recent hit due to an eviction or job loss.

What are your options?

What are your options?

Modify your Credit Score Requirements

You can decide to “lower your standards” or lower the actual number you deem an acceptable credit score. If your property goes this route, you’ll definitely want to keep up to date on current trending news about employment rates and CIC’s FICO Score Analysis to make sure you’re staying on top of the real world changes. You can also inform your residents that they can keep up with their own score for free on a weekly basis. You’ll need to go above and beyond just a simple credit report, or eviction and criminal data to make this decision, because black and white decision makers won’t work in a review. By using alternative data products and an edited credit score requirement, you may find coming to a decision that much easier.

Increased Security Deposits

You can increase their security deposit. Some landlords see this as a solid way to combat anxieties when renting to someone with bad credit, but you should check with a local lawyer to make sure it is legal in your area. It may help with  any nightly worries that having any tenant may be better than a vacancy, but what if? It’s one way to protect your property, and sometimes that small comfort is greatly cherished.

Modify your Credit Score Requirements

You can decide to “lower your standards” or lower the actual number you deem an acceptable credit score. If your property goes this route, you’ll definitely want to keep up to date on current trending news about employment rates and CIC’s FICO Score Analysis to make sure you’re staying on top of the real world changes. You can also inform your residents that they can keep up with their own score for free on a weekly basis. You’ll need to go above and beyond just a simple credit report, or eviction and criminal data to make this decision, because black and white decision makers won’t work in a review. By using alternative data products and an edited credit score requirement, you may find coming to a decision that much easier.

Increased Security Deposits

You can increase the required security deposit. Some see this as a solid way to combat anxieties when renting to someone with bad credit, but you should check with a local lawyer to make sure it is legal in your area. It may help with any nightly worries that having any renter may be better than a vacancy, but what if? It’s one way to protect your property, and sometimes that small comfort is greatly cherished.

Go Month-to-Month

Consider a short-term lease. While month-to-month leasing comes with its own problems, it may be a half-way decent solution for now. A vacancy is just losing money, so filling the property even for a short while can be helpful. It will also minimize risk if the applicant’s credit score makes you wonder whether or not they’ll pay their rent. If they miss that first month, then you can issue their thirty-day notice and move on.

Go Month-to-Month

Consider a short-term lease. While month-to-month leasing comes with its own problems, it may be a half-way decent solution for now. A vacancy is just losing money, so filling the property even for a short while can be helpful. It will also minimize risk if the applicant’s credit score makes you wonder whether or not they’ll pay their rent. If they miss that first month, then you can issue their thirty-day notice and move on.

Require a Co-Signer

Have a co-signer. This is a tactic often saved for young adults first venturing out into the world with no credit score to speak of in the first place but can work here. If the rental applicant can find someone with a better credit score who could cover a defaulted rent payment. They may need to have an awkward conversation with a friend or loved one, but everyone has a part to play.

Before moving forward with any approved rental criteria changes, make sure you discuss this with your team. Applicants will not only need to be vetted by the same criteria, but your onsite staff should be on the same page when it comes to answering applicant questions regarding that criteria Laying the groundwork for a trusting but professional relationship is important, and the transparency of what is to be expected from both your property and your applicants will help ensure everyone knows what your community’s expectations are.

Maybe when everyone knows what they can expect, the TV will stop talking about unprecedented times.

How do you plan to during the COVID recession?

Require a Co-Signer

Have a co-signer. This is a tactic often saved for young adults first venturing out into the world with no credit score to speak of in the first place but can work here. If the rental applicant can find someone with a better credit score who could cover a defaulted rent payment. They may need to have an awkward conversation with a friend or loved one, but everyone has a part to play.

Before moving forward with any approved rental criteria changes, make sure you discuss this with your team. Applicants will not only need to be vetted by the same criteria, but your onsite staff should be on the same page when it comes to answering applicant questions regarding that criteria Laying the groundwork for a trusting but professional relationship is important, and the transparency of what is to be expected from both your property and your applicants will help ensure everyone knows what your community’s expectations are.

Maybe when everyone knows what they can expect, the TV will stop talking about unprecedented times.

How do you plan to during the COVID recession?

Spread the word. Share this post!

Nicole Seidner

Cole Seidner is a copywriter here at the CIC Blog. She holds a degree in Writing from Savannah College of Art and Design with a focus in creative nonfiction. Her free time is spent taking pictures of her dogs or reading deep dive analysis on movies that she hasn’t seen.

Comments (2)

  1. Avatar
    Reply

    Good timely article, Nicole. However, I question whether an eviction will effect a credit score unless it is sent to collections. As I’m sure you know, a couple of years ago civil judgments no longer effect a score.

    • Avatar
      Reply

      Thanks for your feedback and reading our blog, Herb! You’re absolutely correct in the change that took place a couple of years ago, as well as the fact that an eviction will hurt a credit score if it’s sent to collections. With the current nationwide concerns regarding housing, the ability to pay rent is among the top issues being discussed. Because of this the concern is that tenants being behind on rents could lead to an increase in accounts sent to collections which would damage credit. This is in addition to other bills that may have had late payments due to COVID in which the bureau (or data furnisher) didn’t correctly adjust the credit report to have these negative tradelines not hurt the consumer’s credit. Unfortunately, all of this adds to the list of things property operators need to remain aware of when reviewing rental applicants so as not to let the written criteria inadvertently lead to denying tenants who may be qualified, but were victims of COVID restrictions.

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