If you are a property manager, you will have to deal with a tenant that has less than perfect credit record at some point. Of course, every property manager wants to rent to a tenant with a stellar credit score. Unfortunately, this will not always come true.
In the United States, the average credit score is 675-699 range, this means that anything less than this is less than perfect credit record. Of course, millions of Americans have credit records that are less than the average. You will have to encounter these types of tenants at some point.
In this article, you will learn how to deal with tenants that have less than ideal credit scores:
Top 5 Ways to Minimize Risk When Dealing with Tenant With Low Credit Score
- Advance Rent Payment
To ensure that you always get your rent, ask the tenant to make payment of rent in advance especially when the tenant has a poor credit record. Some of these tenants may have access to funds to offset their rent.
A good example is asking this type of tenant to pay for 2 months to 3 months in advance instead of paying for just normal one month rent. This way, you will be able to minimize the risk involved in working with this type of tenants. Have a policy that states that the potential tenant should be paying in advance.
Ask For a Guarantor or Cosigner
When dealing with a tenant with low Credit score, you can ask him to get a guarantor or cosigner that is ready to pay the rent for him in a situation he is unable to pay his rent. In most cases, your tenant will need a cosigner especially when your rental properly houses a lot of young people like students. This type of people may not yet have the chance to establish their own credit history.
You can be able to get their parents or guardian to be a cosigner, this way; when the tenant defaults on his rent payment, you can get his cosigner to pay off the rent. This will ensure that you always get your rent as at when due.
- Demand a Larger Deposit
Don’t be afraid to demand a larger deposit from a tenant with low credit score. However, you must read your state law to see if there is any limitation on the amount of deposit a can landlord can collect from the tenant.
When you are dealing with a tenant that has less than stellar credit scores, it is considered a risk and you can ask him to pay for more than one month deposit. This extra deposit will help you to cover the risk in case he was unable to make timely payment or unable to pay at all.
Adopt Timely Communication
Don’t wait until the last minute to inform a tenant about his upcoming rent. You should always send timely reminders through email, social media, or regular mail. It makes sense to send remind 4 or 3 weeks before the rent is due, this will give the tenant a chance to gather his money and get it ready for payment. We would recommend that you adopt online payment. This type of payment will make it easier for your tenants to pay on time.
- Adopt Automatic Payment
A great way to guarantee timely payment is by adopting an automatic payment. You can do this by using an auto-deduct system that allows you get your rent every first week or last week of the month. This way, you can be sure that your rent will come through as far as the tenant has the required amount in his bank.
Remember, when dealing with a tenant with low credit score, you have to make your policy clear. Ensure that your tenant reads and understand the policy, this way; you can avoid problems in the future. If you are a landlord, the best way to deal with this type of tenant is to make use of a top Los Angeles Property Management Company.