You’re a landlord who worries whether to accept or not a tenant with bad credit; this guide is meant for you. Here, you’ll learn to rent confidently, being able to protect your own property while giving someone with a low credit score a fair chance at housing.
We’ll talk about the strategies you can use to minimize risk, the red flags to watch for, and the practical tools that help make informed decisions. Let’s dive in!
Learn The Reason of the Bad Credit History
Bad credit doesn’t always mirror a tenant’s current financial situation. Someone may have had poor credit due to medical emergencies, job loss, or changes in marital status, which can impact credit. As a landlord, you must look beyond the number.
Dig deeper and understand why that score is low. Understanding the story behind the score can help you avoid unfairly dismissing qualified renters and create opportunities for responsible tenants who deserve a second chance.
Credit Check: Minimum Score To be Considered Safe
A credit score is a numerical summary of a person’s creditworthiness. It’s based on their credit history, like payment history, debt levels, and credit utilization.
A good number of tenants credit score is 650 or higher. Scores below this threshold may require closer inspection, as they can indicate past financial difficulties or a higher risk.
Key notes: Credit score isn’t everything. A 700 score with no rental history can be riskier than a 620 score with 5 years of perfect rent payments.
Run a Full Tenant Screening
Tenant screening was meant to find tenants who are financially responsible, reliable, and respectful of the property.
Landlords evaluate potential renters by checking their credit history, criminal background, eviction records, income, and rental references.
They check:
- Credit report: to evaluate their financial responsibility and their timely bill-paying history.
- Criminal background: to identify any safety concerns.
- Eviction records: to see if the applicant has been evicted before.
- Employment status and income: to ensure they can afford the rent.
- Rental history: by reaching out to former landlords to learn about the tenant’s behavior.
Set Clear Lease Terms
Outlines the renter’s responsibilities and consequences, and is explicit about important rules. Set firm expectations so tenants understand that disrespecting the agreement will have serious consequences.
Spell out:
- Late payment penalties
- Grounds for eviction
- Rules around subletting, damages, etc.
Use a legally binding lease agreement with all details in writing. And, make sure the tenants fully understand the lease terms and their obligations before signing.
Conduct Interviews In-Person
Meeting potential tenants face-to-face allows you to get a better sense of who they are beyond their application and credit report.
It gives you the opportunity to:
- Ask the reason why they got bad credit in person.
- Ask questions about their rental history, employment, and lifestyle.
- Observe their attitude and honesty.
- Discuss expectations clearly and gauge their responsiveness.
- Clarify any concerns or inconsistencies found during the screening process.
Keep an eye out for red flags like hesitating to share information, contradicting themselves, or showing negativity. Trust your gut and dig a little deeper if you notice them.
Require a Higher Security Deposit
In cases where a tenant has poor credit but seems reliable in other ways, consider requiring a higher security deposit. This larger deposit serves as a financial safety net in case of property damage or missed rent payments. However, the amount charged must comply with local and state laws.
In Clarksville, TN, there is no specific dollar limit or percentage cap for residential security deposits. Landlords can legally charge any amount they and the tenant agree to in the lease. However, the amount must be considered reasonable under the circumstances. “Reasonable” means the security deposit should not be excessive or abusive.
Offer a Month-to-Month Lease
Start with a short-term lease to test the tenant’s reliability before committing long-term (usually 30 days). Unlike fixed-term leases like 12 months, this type of lease doesn’t lock you in for the long term.
This allows you to monitor how the tenant behaves before offering a long-term lease, reduces the risk of being stuck with a problematic tenant for a full year, and is Ideal if you’re uncertain about the tenant’s reliability.
If all goes well, you can transition to a longer lease later, making it a low-risk, smart starting point for both sides.
Use a Co-Signer or Guarantor
A co-signer or guarantor is a third party who agrees to legally take responsibility for the lease if the tenant fails to pay rent or breaks the lease. They are usually a family member or close friend with a stronger credit history and stable financial situation.
They need to sign a legal document agreeing to be responsible for the lease obligations. Having a co-signer or guarantor can make it easier to approve tenants with low credit scores, limited rental history, or unstable income.
Legal Considerations When Renting to Tenants with Poor Credit
When considering applicants with bad credit, always follow the Fair Credit Reporting Act. This means you must get written consent before running a credit report, and notify the applicant if the credit check affects your decision.
Be consistent in your tenant screening process to avoid discrimination claims. Use the same criteria for all applicants, whether they have good or bad credit. Keeping documentation and using objective standards helps protect yourself as a landlord legally.
Final Strategies for Renting to Tenants with Bad Credit
To summarize, renting to tenants with bad credit requires balance and smart practices. Always perform a thorough credit check, evaluate the full financial picture, and consider additional protections like:
- Requesting a larger security deposit
- Asking for rent upfront
- Requiring a guarantor
- Verifying proof of steady income
- Creating clear, strong lease terms
These strategies for renting to tenants give landlords the confidence to make informed decisions while offering a second chance to those who may have had credit issues in the past.
Partner with Clarksville’s Trusted Property Management Experts
At Connerth & Co. Property Management, we help homeowners manage their property easily.
Whether you’re facing bad credit renters or simply looking to streamline your rental process, our experienced team is here to guide you every step of the way.
From thorough tenant screening to lease management and setting Clear Lease Terms, we take the stress out of being a landlord. Call us today!
Key Takeaways: Renting to Tenants with Bad Credit
- Bad credit doesn’t always equal a bad tenant — context and history matter.
- Use tenant screening to assess an applicant’s credit history, income, and rental history.
- A larger security deposit or several months’ rent upfront can help reduce risk.
- A guarantor with good credit adds an extra layer of financial security.
- Encourage tenants to pay rent on time to help them improve their credit.
- Evaluate whether the tenant can afford rent, even if their credit score is low.
- Include clear terms in the lease to protect yourself and ensure expectations are understood.
- Remember: poor credit might signal past hardship, not future failure.
FAQs
Q. What is the lowest credit score a landlord will accept?
A. There is no universal minimum, but most landlords look for a score of at least 600–650. A score below 600 is considered “subprime” and may lead to a denial or require extra protections.
Some landlords may still accept scores in the 500s if the applicant shows other strong financial or rental qualifications. It ultimately depends on the property, market conditions, and the landlord’s risk tolerance.
Q. Can Tenants Improve Their Credit Score While Renting?
A. Yes! Renting can actually help tenants build or improve their credit, though it often depends on how their rental activity is managed and reported. While rent payments haven’t traditionally impacted credit scores, this is changing as more property managers and services offer ways to include rental history in credit reporting.
Additionally, maintaining consistent, responsible financial behavior while renting can contribute to better credit over time. Renting can be a stable financial indicator that, when properly reflected in a tenant’s credit profile, helps build trust with future landlords, lenders, and creditors.
Q. What background check do most landlords use?
A. Most landlords use a comprehensive tenant screening service that includes:
- Credit report & score
- Criminal background check
- Eviction history
- Identity verification
- Employment/income verification (optional)
