Had an interesting discussion with another property manager recently regarding how many more renters there are today, than just a few years ago, but that the question marks on the background checks are more numerous. Usually, people are renting because they can’t buy or they need temporary housing. Now it seems that most applicants just could not qualify for a new credit card…and that is saying a lot.
The issue came up of prior bankruptcy on an applicant’s record. Ultimately, in our company, the decision for approving a renter will go to the owner. We provide guidance. Bankruptcy over two years from the discharge date is usually something that can be not weighed too heavily as it is likely the applicant has started to reestablish their credit and there is probably more recent performance to consider. It is the applicant who is in bankruptcy, or just discharged, that creates questions.
One side of the argument considers that the applicant now has little to no debt to service and is likely in as clean of a position as any tenant without a bankruptcy. It is also helpful to gain an understanding beyond the credit report…such as what caused the bankruptcy. Confirm what you are told. If it checks out, historically I have usually erred on the side of compassion…assuming there are no other flags in the tenants background. Knock on wood; in over 15 years of managing properties, my experience with people in a recent bankruptcy has been what has formed my opinion and subsequent recommendations to owners.
The other manager had an interesting perspective, that I can respect, but lets just say is much less compassionate toward applicants involved in a recent bankruptcy. It feels to me like the voice of a very bad experience. His point was that people do not reach the decision to file bankruptcy easily. It is usually the end result of many years of avoiding creditors. Having filed a bankruptcy allows a person to learn the ropes of avoiding their debts completely. It hardens the people involved and makes them more knowledgeable of the ropes and loopholes in the creditor system. They may not ultimately be as concerned about damaging their credit again. So, this manager is very cynical about a bankruptcy without a subsequent significant history of post-filing credit handled properly.
What is the right answer? It depends. Like many things in life, experience is the best teacher. Maybe the other manager only performs a credit check and stops with a bankruptcy. We go deeper. We pull tenant histories and employment verifications. We look at criminal background checks. To me these all add to the portrait that becomes a full representation of who is the applicant. Not saying that the other manager is wrong in closing the door so quickly on bankruptcy in a tenant’s report. Just saying that our history is that bankruptcy happens to some really good people that make great tenants. There is more to a person than just their credit score. Good and bad.
What do you think?
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Tags: Indianapolis Property Management, Indianapolis Property Manager, tenant qualifications, tenant screening, Wilmoth
