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Resident Application Approval Process: Red Flags

Posted on 29. Jun, 2010 by Mary Girsch-Bock in Business

In my last article, Resident Application Approval Process: Key Indicators, I discussed the areas to look at when reviewing an applicant’s credit history. What follows is a list of potential red flags.

Late Utility Payments
It normally takes several late payments for a utility company to report customers to a credit bureau. This is important because like a rent or mortgage payment, utilities are a necessity and a repeated failure to pay utility bills may more accurately predict the failure to pay rent.

Prior Evictions
This is a big, big red flag for many different reasons. While property managers know that there are many reasons for tenant evictions, the reason will not be listed on the credit report. If you find yourself inclined to rent to an applicant with a prior eviction, contact the previous landlord and find out why they were evicted. Did they lose their job? Were they going through a divorce? Or did they simply skip out on their lease?

Credit Status
Obviously, it’s best if your applicant pays their credit card bills on a timely basis, but an occasional late payment is not cause for alarm. A better category to check is the applicant’s credit limit and any over-limit charges. Consistently exceeding credit limits can be an indicator of two things; applicants are living beyond their means, or they’re using credit cards to pay bills. Either reason is cause for alarm.

What Really Doesn’t Matter
Perhaps your applicant ran into financial problems several years ago, but since then has worked hard to straighten out their problems. While old credit issues are certainly worth questioning an applicant about, if there are no recent issues listed on the credit report, it should not be a deal breaker. Another issue frequently raised are unpaid medical bills. With more people facing a reduction in health care benefits, or loss of insurance altogether, unpaid medical bills should not play any significant role in determining the credit-worthiness of an applicant. Yes, in some cases it may show a lack of responsibility, but it should not be the determining factor in applicant approval.

What all of this means for the property manager is that a credit score is not the only factor to take into consideration when approving an application. While you may have to spend more time up front in order to determine the credit risk an applicant poses, what you’ll likely receive in return is a solid, dependable tenant; something that all property managers desire.

Related Posts
Resident Application Approval Process: Key Indicators
What’s The Most Important Resident Screening Criteria?
The Right Way To Evict A Resident – Learn the Correct Process Before You Need It
Screening Tenants Consistently for Fair Housing
Property Manager Sets Resident On Fire Over Late Rent

Tags: applicants, move-in