How do you screen tenants with poor or no credit history?

I agree that a rental verification can be a critical part of an approval process; however, it is important to remember that human beings complete these verifications. These individuals can be leasing agents, assistant managers, or property managers depending on your company’s policy. With this said, bias can always become a factor and can land someone in a sticky legal situation should a potential renter feel discriminated against. I always recommend keeping it simple and going off of the facts. A few simple questions on a rental verification form such as “were there pets in the home?” or “did the tenant receive any lease violations?”, in addition to a copy of the potential renters ledger, will tell you everything you need to know.

Rental references are important, regardless of credit history. However, be cautious of fraud, and/or receiving incorrect information. For example, an renter's current landlord may have had a poor experience with the renter and would like them to move out as soon as possible, so they may give a positive reference to encourage the renter to vacate. In my experience, the landlord of their previous apartment (not the one they currently live in) can provide a more accurate picture. Additionally, it's important to verify the landlord contact information provided is legitimate, and not a fake number/email of a friend that will pose as a landlord to provide a positive reference.

You may also consider using a surety bond service such as The Guarantors, Rhino, etc. The renter will pay a fee in the range of 20% of the security deposit, and can provide more protection from damages or unpaid rent.

I believe that evaluating a person's financial stability should move more toward open banking assessments, which focus on account activity rather than just credit scores and income from jobs. My experience as a lettings negotiator showed that even people with high incomes could struggle to pay their rent. To me, open banking provides a better understanding of a person's cash flow. Those with low incomes might consistently show good financial habits over the course of five to ten years by keeping a cash surplus, paying rent on time, and not overspending. As a result, landlords will be provided with better assurances about a tenant's financial stability and ability to pay rent, and tenants will have more choices.

Many platforms are providing tools to analyze a tenant's bank accounts to verify that their income is legitimate, without forcing the tenant to provide a history of all of their personal transactions (e.g, "why does this landlord need to know how often I go to Starbucks?"). The 30% rent-to-income ratio is a good starting point, but everyone's financial situation is different. An applicant may be willing and able to pay upwards of 40-50% of their income as rent because they have minimal expenses (no credit cards, student loans, car payments, etc), whereas someone with a high income, due to extensive debt or recurring payments, may not be able to afford an apartment that is 30% of their income.

Please consider that credit score has not always been a determining factor when it comes to renting. The concept didn't even exist before 1989. That being said, a lot of my tenants have been Section 8 / Housing Voucher recipients who have their rents guaranteed. Thus, in line with Fair Housing, you should not deny a S8 voucher holder based on credit, if they are the first applicant. Also folks with zero credit, and have no debt history should also be eligible. Many seniors have this problem when renting because they did not grow up with credit scores.