As a property manager, you depend on credit scores to help you make the best rental decision, but how much do you know about credit scoring models? With this guide, you’ll not only learn some of the differences between FICO™ and VantageScore® 3.0, but how to use credit scores to uphold your rental standards and protect your community.
Credit Scoring Models 101
Just to recap- two of the most used credit scoring models (VantageScore®3.0 and FICO™) generate easy-to-read scores on millions of consumers (aka your rental applicants). Both scoring ranges go between 300 and 850, and they are used for a variety of uses, from credit cards to bank loans. The differences between them are that they are developed by different companies and that they have different approaches to scoring credit information. FICO™, one of the most recognizable brands, was developed by the Fair Issac Company and uses different scoring models depending on the purpose of the report (so a credit score for a car loan would be scored differently than for resident screening). VantageScore® 3.0, on the other hand, was developed by the three major credit bureaus, and its model has the ability to analyze “thin” (consumers with minimal information) credit files.
While there are plenty of other scoring models out there, it’s best to stick with either VantageScore® 3.0 or FICO™ as these off-brand models are not standardized (the formula and analysis is without credit bureau input). You wouldn’t want to find out that the credit score you’re receiving has been skewed towards another company’s interests.
As a property manager, you know that the Fair Housing Act protects renters from facing discrimination when applying, buying, or renting any sort of housing. It prohibits “discrimination because of race, color, national origin, religion, sex, disability, and the presence of children.” In order to cover your bases from potential discrimination lawsuits when making a rental decision, it’s vital that you adhere to your pre-written rental requirements.
While I’m sure your community’s income requirements and appropriate scoring ranges to accept, conditionally accept, and deny an applicant have been established, having these requirements written down helps covers your bases in court and is a good reminder if you’re managing multiple properties with different requirements. Print out our fillable cheat sheet (as many times as you need for each community) and stick it near your desk to make sure you remember your guidelines.
While using our cheat sheet to enforce your rental requirements can help you stay compliant with the Fair Housing Act and using a creditable scoring model like VantageScore® 3.0 and FICO™ can help protect your communities, there’s one more thing you should be aware of. Do not accept pre-processed credit reports from your rental applicants. Credit reports can not only be forged, but be from a non-trusted credit source (disguised to look like a FICO™ score). If your applicant is worried about the background report impacting their credit report, use ApplyConnect®. As a renter-initiated report, the credit report is deemed a “soft pull”, meaning it will have no impact on their credit score.
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