Renting With Bad Credit

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By PETER ROSENTHAL, President
V.I.P. Trust Deed Company

Over the last 30 years I have owned and operated many rental properties and have dealt with many hundreds of tenants and prospective tenants. My purpose in writing this column is to give some practical advice to “tenants with problems.” Hopefully, many of you landlords out there are flexible enough to accept a tenant with credit problems under the following conditions.

I often receive tenant applications with “poor credit.” I always check credit, thoroughly check the application for truthfulness (employment, tenancy, etc.), check for bad checks and, most importantly, verify that the tenant has never been evicted. I am smart enough NOT to have firm rules like “I won’t rent to anybody who has bad credit; I won’t rent to anybody who has ever been evicted; I won’t rent to anybody who has bounced checks.” If I had firm rules like that I would have, over the years, passed up at least 100 excellent tenants. Many large apartment complexes just refuse to make exceptions, as the apartment manager often does the tenant selection and large landlords are uncomfortable giving property managers any leeway in selecting tenants. The simple way to handle any of the above referenced deficiencies is to ask for either a larger security deposit or a third party guarantee. In the event you are asking for a larger security deposit, make certain that the rent, security deposit and associated fees DO NOT EXCEED three times the amount of the monthly rent. If you do ask for more than that, you will be in violation of the California Civil Code—in most cases.

If a prospective tenant has reasonable credit and a good job but suffered an eviction some years back I will NOT automatically reject that tenant. In that case I will interview the prospective tenant face to face and ask for a complete explanation. Though I am on the “landlord side of the desk,” I try to keep an open mind and in some cases I will rent to a person who has been previously evicted, with either the extra security or guarantor. In all honesty, I end up rejecting 90% of people with previous evictions, but there really are some good prospective tenants who have been given poor legal advice but really have good credit and an excellent job history. Over the years I assure you I have picked up at least ten good tenants that way, who “the rules” would have automatically rejected. I often hear horrible legal advice to tenants facing a landlord communication problem.

The tenant is told to not pay a disputed item or not move after a 30 day notice. The advice is often, “Let the landlord evict you, it will take extra time” or “Tell the judge your side of a rent dispute.” This advice is absolutely horrible because the tenant ends up with the dreaded EVICTION on their eviction history and usually a judgement on their credit history. Over the years I have written to a couple of these “radio lawyers” and begged them to stop giving this “let them evict you” advice.

If you are a tenant with one or more of the blemishes outlined above, do NOT try to hide them, especially a prior eviction. When an application asks if you have ever been evicted or filed bankruptcy, ANSWER TRUTHFULLY and add an extra letter of explanation giving your side of the problem, i.e. huge medical bills, previous divorce, previous disability, etc. Emphasize the positive steps that now counter the bad history and, if necessary, offer an extra security deposit if available. Check with friends or relatives in advance to find out if they would be willing to guarantee your rental agreement or lease (if necessary). Also, if you are very young, leaving the nest, and this will be your first apartment, be prepared for rejection. Most landlords look for length of employment and some previous rental history. Though it is illegal for a landlord to discriminate against a person because of their age, there is no question that it is MUCH HARDER for a person with no previous rental experience to get their first apartment. Fortunately for my tenants, I have a good memory and remember when I was applying for my first apartment, my first credit or whatever. Again, if you are in this first apartment situation, either offer an additional security deposit or check with your parents for the possibility of a guarantee.

The bottom line is, if you are rejected for an apartment, try to get the landlord to reconsider based on your willingness to provide an additional security deposit or a third party guarantor.

If you are a landlord reading this column, please believe me when I say that you may have lost several good applicants in the past because of rigid rules. I am aware as I write this that landlords don’t really need to ignore their RULES as we are experiencing a strong demand for rental housing. This, however, has not always been the case and in the mid-1990’s you may have been running 5-15% vacancy rates. The above advice could have easily reduced that vacancy rate substantially.

Let’s be flexible on both sides.

Peter Rosenthal
VIP Trust Deed Company