The way we judge what makes a good credit score is starting to change, especially with VantageScore becoming more popular, so it’s important to understand that the credit reports you receive from tenants might contain different information than you’re used to. First, you must check the report to determine of the three-digit number was determined using a FICO score or a Vantage score. The numbers remain similar, but the goalposts are shifting as far as the cutoff between “good” credit and “fair” or even “poor” credit.
Most property managers and landlords are used to checking a credit report for the FICO score. According to Experian, a “good” score is in the 670-739 range, with the 740-799 range qualifying as “very good” and any score above 800 qualifying as “exceptional.” By this model, 60% of people have good or better credit.
VantageScore, on the other hand, is more stringent in how it defines good credit. By this model, only 43% of people have “good” credit. Using this measure, a person must have a score over 700 to qualify for “good” credit (700-749), and anything over 750 qualifies as “excellent” credit. We went over the differences between FICO and Vantage scores in a previous post, which we recommend you review to get a better idea of how these numbers are reached.
VantageScore and FICO Score
As you can see, depending on the scoring system used, a person with a score less than 700 could have either “good” credit or merely “fair” credit. An important note on Vantage scores: credit inquiries and history are weighed differently than FICO, so multiple inquiries in a short period of time could affect the score more negatively. Also, only the primary account holder is factored into a Vantage score, so this may change reports for a couple or family. Some overdue payments are weighted more heavily than others, such as mortgage payments, which gives you more insight into their payment habits.
Since Vantage is a newer scoring system (it was introduced in 2006), most landlords are more accustomed to FICO scores. Your determination for what credit score you’ll accept from a prospective tenant depends on several factors, such as the type of housing, area, demand, or type of tenant (individual, couple, family, etc.). Some landlords will accept scores as low as 550, some will only accept scores over 700. Income also plays a role, of course, and the determination for what works best for you and your specific property is your call. We are happy to work with you to provide additional personalized insight and advice.
This is where tenant screening can come in handy. With a full or even partial credit history report, you can determine if an applicant has a spotty history and could be a risk, or whether they’ve hit a bit of a rough spot but generally have a strong credit background. It’s entirely possible that the Great Recession caused a family a lot of credit woes, but they’ve been steadily recovering and are good candidates for your unit. A Vantage score may be more forgiving, since it focuses more on recent credit activity.
At the end of the day, the call is yours. To better help you make the right decision, try our RentalConnect program, which offers property owners and landlords a great alternative to the expense of full tenant screening. This service requires no on-site visit, sign-up, or membership fees, making it extra convenient. The $34.95 service fee is paid by the applicant. Available 24/7, RentalConnect is fast, easy, secure, and delivers reports needed to make an informed decision, including a credit report, a national criminal search, and a national eviction search. Reach out to us for more details!
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