Legitimate Reasons You Can Use to Decline an Application

It’s important that you understand that when somebody applies for your apartment or house, that if you decide to decline them that you do it in such a way that it’s not going to get you in trouble.
Obviously, you cannot decline somebody based on sex, on race, on religion, things of that nature, so you’re aware of that. Family status, obviously, we talked about that last week. There are a lot of reasons why it’s perfectly legitimate to decline a perspective tenant. We’ve listed those out and I’ll go through them.
False application. Obviously somebody put something false on their application. That is a clear and easy way to eliminate that person from living in your property.
Too many people. If there are six, eight, 10 people that want to live in the house, obviously it might not work. You’ve got to live within zoning regulations and things of that nature.
Pets. You can decline somebody because of pets. If they have pets and you don’t want them, you’re perfectly right to decline them.
Lack of income, and you should try to define that. The way we define it is their income must be three times the monthly rent. For example, if the rent is $1,000 per month, we would be looking for an income of $3,000 per month.
Now, that’s gross income and that’s total adults in the house. So if it’s a husband and wife and they both make $1,500, in theory they would qualify on an income basis. If there’s three people and they each made $1,000, in theory they would qualify at $3,000.
What I would suggest to you guys is determine whatever number that you want. We use 3.0. We don’t vary from that very much. I’m not going to say we haven’t accepted a 2.8, 2.9 from time to time, but I would not deviate from that number very much. I would really hold fairly strictly to that number or whatever number you decide on. Depending on your area or the economy, you might be willing to do 2.5. Whatever number you pick, kind of stay with it very consistent.
Other reasons you can decline somebody is they don’t pay their bills or have a low credit score. What is low credit score? That’s a tough call. It used to be probably 550. Today it’s probably 450. Credit scores have gotten absolutely trashed in this economy recently. It’s been quite dramatic.
We have a property right now that we’re advertising and we’ve gotten eight or nine applicants for it. Except for one, the credit scores were all in the 400s or low 500s. It was just really shocking. I don’t ever remember that happening before. I’ve never seen credit scores as low as I’ve been seeing the in the last few months.
Credit scores are a tough way right now to evaluate perspective tenants. If you’re strict about it, you’re going to have a hard time filling your units. What’s going on? We use some sense of judgment here.
We do eliminate certain things. If the person has a lot of medical issues, we might overlook credit scores, because we know that medical companies are notorious on how vicious they are in terms of credit scores. We may overlook that.
Be careful with the credit scores. I think it’s harder and harder to use credit scores and have a firm, hard number, below 500 or below 600, I’m not going to accept that. Given today’s economy, I think you have to be somewhat flexible in that number.
If anything has been turned over for collections, you can eliminate them.
Obviously, if they paid their rent late and their prior landlord verifies that, it’s pretty obvious that you don’t want them.
If they filed bankruptcy. Now you would think that’s obvious and clear, but in some cases it’s not a bad thing because it does clear out all their other debt. It can be almost a good thing if they’re through the process, they’ve cleared out all their other debt, and at that point hopefully they can focus on rent and things.
If they have judgments or lawsuits
If there’s any illegal drug activity
Prostitution
If they have possession of stolen property
Possession of illegal firearms. These will all be things that you could eliminate a tenant for.
Negative comments from the prior landlord. This is a pretty important one. If the prior landlord is saying something negative, it’s pretty sure that this is not somebody you want to be involved with.