Taking a bit of a departure from what I usually write about on my blog to talk about something I think is important, especially considering the current social climate in the United States. It seems like over the past decade it’s been becoming increasingly difficult to find rental properties and at the same time discussions around an ever increasing housing crisis have become more and more frequent.
Recently I’ve been in the market for a new apartment for my family after recently emerging from a whole lot of major life events that made it difficult to obtain and maintain long term work for an extended period of time. Since I was out of work for a significant amount of time I also took a substantial financial hit that caused my credit score to basically tank - it was at the point that I was almost ready to declare bankrupcy when I was finally able to re-enter the job market but I thought that would only hurt me in the long run.
I’ve been searching for an apartment for 3 months as of this article and one thing that’s been troubling is that seemingly every rental is now requiring a fairly significant credit score in order to be considered. I’ve seen credit score requirements as high as 730 which seems absolutely insane considering that these are rental properties and I’m not even searching in desired areas of the country. In an effort to perhaps change some minds about this I want to outline some of my thoughts on why this is inappropriate and why this should not be something that landlords consider when searching for a tenant.
Privacy
Finances are deeply personal and while I understand that some information has to be exchanged in order to build trust in a landlord/tenant relationship sending my income statements and discussing them is vastly different than providing every potential landlord a copy of my personal credit history which contains private and sensitive personal information dating back 7+ years in many occasions. I’ve had potential landlords make comments about prices I’m paying on certain loans, comments about credit cards I have, things that are frankly none of the landlords business that have no bearing on my ability to pay rent. This is wildly intrusive with little benefit to the landlord or our landlord/tenant relationship.
When I first started seeing credit scores as a requirement it was typically done by realty companies renting places for themselves or their managed clients and back then it was easy to ignore and skip over them but now it’s everyone and I believe the privacy aspect is a large part of this. Data has become more valuable and some landlords are nosey, condescending or just not good people and so if they believe that they can gather more information about you why wouldn’t they? I’m not saying this is how every landlord is but how do we, as potential tenants, know what your intentions are with our data? We don’t.
Furthermore, in order to run a potential tenant’s credit score you have to collect even more personal and sensitive information about them like their Social Security Number among other things. When did we as a society decide that just randomly handing that out to people was acceptable? What’s preventing bad actors from collecting personal information under the guise of rental property?
Landlord Security
While there is a common narrative about credit scores being required because it provides more security to the landlord to know that a potential tenant will pay their rent on time credit score is a terrible metric to use for that problem for multiple reasons. A person’s past financial struggles, often due to medical debt or a period of unemployment, don’t necessarily reflect their current ability or willingness to pay rent, especially when they can provide proof of stable, sufficient income and prior rental references.
I really believe that this reasoning is simply an excuse for bad actors to push people into being more comfortable with the idea of credit score requirements - it’s the gotcha that people use to win arguments about the situation without really considering what those arguments entail. There’s always going to be risks when you’re renting a property that doesn’t mean it’s okay to push irrelevant and uninformed requirements on potential tenants.
Housing Crisis
We’re facing an unprecedented housing crisis in the United States. We have a significant homeless population and it’s growing every year. As our government does it’s best to criminalize homelessness we’re simply making housing even more unobtainable for more people by adding additional ridiculous requirements like a high credit score.
I know it’s popular to pretend that everyone is perfect but in reality many people are not in perfect situations, does that mean people in less than ideal circumstances should just be homeless? How are people that are trying to become better and work towards their goals supposed to achieve those goals when we as a society are accepting new ways to make things more difficult for everyone? Before you say “not my problem” look around your community, there’s homeless people there and there will be more. What’s going to happen to you if you lose your job and are unable to find a new one? It’s your problem too.
Potential Tenants
A common scenario that I’m seeing in the rental market is this:
- 730 Credit Score
- 3x Income to Rent ($2000/m rent = $6000/m income)
- First months, security, last months ($6000 total)
Here are the requirements for a first time home-buyers loan (FHA):
- 500 Credit Score
- 50% Debt to Income (DTI) Ratio
If you meet the minimum requirements for the rental in the first scenario then you may qualify for an FHA loan of $300,000 with a significantly lower credit score so who exactly are landlords trying to rent to? As you move into more expensive markets costs to buy a home go up significantly but so do the costs of renting.
People who meet these requirements are less likely to be searching for a rental and as landlords continue to raise requirements and tenants continue to accept them we’re only worsening the situation. The tenant pool will continue to shrink and then what will we do? Will the rental market pop? It’s ridiculous.
Take Aways
I think we need to re-think what we’re asking and accepting on the rental market, things are not going to get better unless we change them. If you’re a landlord I really want you to consider what you’re asking and think about if it actually makes sense or if you’re just part of the problem. If you’re a tenant you likely have encountered this as well and you should be voicing your concern over this kind of thing.
We live in a crazy world where things are constantly changing. You can have a good stable career and lose everything in what will seem like overnight, becoming another statistic in the housing crisis that everyone pretends to care about but few people actually do.