Qualifing "Unqualified" Applicants

Qualifying “unqualified” applicants seems to be another avenue to gain renters these days. I recently commented on this practice that I would never choose to participate in such a program myself and my comment was finally met with, “Here’s my number. Call me.” Let me repeat, I will never choose to participate in this type of program for myself and would object to using it in my company.

There are two ways of ensuring that Applicants who don’t fully qualify due to being an international person with no established credit history, a citizen who lacks credit history and is most likely a first time renter, or someone who simply has bad credit. According to these new programs, one way is for the Applicant to agree to pay 10% of the total lease cost upfront as a kind of “insurance policy” and the other way is to agree to participate in another type of program where the Applicant agrees to have money automatically withdrawn from his/her paycheck, a kind of payroll deduction. In both scenarios, I was told that the Applicant has to meet the Resident Screening Criteria in every way, which I guess means in every way, other than the credit worthiness as defined by the company.

As Ellen Calmas wrote, “They voluntarily opt in to a lease offer as a way to be responsible in making sure their rent will be delivered on time and so that they can save additional money by not having to pay late fees that create a big expense throughout a lease. These are residents our clients value because of their willingness - once approved - to effectively budget their payroll so that their rent isn't late. They are both qualified by our clients' leasing/screening systems and moved-in because of their willingness prior to signing a lease to take extra steps tied to payroll to make sure they perform.’

She continues, “Our experience shows that asking a resident who is in the lower centime of credit to drain their savings in order to move in is asking for trouble in that they very likely won’t have funds to pay rent somewhere in their lease.”

While I understand the premise, I fail to see how someone with negative credit actually meets the usual Resident Selection Criteria for most companies. In addition, I wonder why I would want to approve an Applicant who I already suspect may have financial issues great enough to impact their ability to pay their rent on time? Additionally, I think the potential Applicant most likely to qualify for this program is an Applicant at a C property where the rent is usually lower than at a B+ or A property. In my experience, when someone coming to my conventional C property applies and has his application declined due to negative credit history, even when they do pay a higher security deposit, 62% very often default on the lease. Even those who may choose to participate in the type of “insurance” or payroll deduction program are often the very renters who frequently change jobs, lose jobs due to being fired or being laid off, and whose jobs may be temporary. Clearly, in order to participate in a payroll deduction program, the Applicant has to be working. Do they have to be employed for one year?

I just cannot imagine telling an Applicant that he does not qualify to live at the property on his own merits, but he may still be offered a lease when he agrees to pay 10% of the total lease value – up front – or, agree to have money for the rent deducted through a payroll participation program. As it was pointed out to me, the payroll deduction program is completely voluntary. However, to me, on a gut level, it does not feel voluntary. It feels like a garnishment. I would feel completely different if the program was presented as an optional pay method for all residents. However, to tell the Applicant he has to participate in order to sign a lease, seems punitive to me. Plus, there is no guarantee the person will not encounter issues if he becomes unemployed. It makes more sense to me to abide by the higher security deposit and/or co-signer requirement as an option.

Some people are not going to be financially qualified to live at our communities. If your Criteria automatically declines applicants with felony backgrounds, do you spend a lot of time worrying about it and trying to design and locate loopholes so they can qualify? Most likely, you do not.