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May 2010 Issue
RentGrow "In the Know"
At RentGrow we have a bird's-eye view of numerous multifamily industry trends - our customers manage thousands of properties across the nation. With almost all of our clients reviewing credit as part of their screening process, we get a first-hand look at important credit trends affecting our industry. In this month's newsletter, we will share some interesting credit trends and consider how property management companies can best maneuver in current market conditions.
The trend is clear: bankruptcies are on the rise while foreclosures remain flat. Since the collapse of the housing market, the nation, and property management companies in particular, have been keenly focused on the growing number of foreclosures in the US. Interestingly, the foreclosure rate observed on apartment applicant credit reports remains relatively unchanged since 2009, while the number of renter applications with recent bankruptcies on their credit reports has increased by 9%, compared to this time a year ago.
Have you reviewed the way you evaluate applicants with bankruptcies on their credit report? Work with your screening provider to understand how these applicants are performing, and whether you think you need to make a change to your screening criteria.
In the past few years, credit has become harder to obtain for consumers, and now properties are receiving more rental applications from prospects with thin credit files. In Q1 2010, over 32% of apartment applicants had thin or no credit history - almost 1/3 of the renter applicant population!
Based on historical data, applicants with thin credit files could be considered high risk. In terms of lease performance, these applicants perform similarly to applicants with moderate credit risk profiles. If you haven't already, you may want to make sure you are adequately gauging and managing the risk associated with applicants in this category. Work with your screening company to understand how these applicants are performing, and whether you think you need to make an adjustment, such as modifying deposit levels or conditional acceptance policies.
Property management companies are processing more applicants with unpaid medical debt than ever before. Many people are stretched financially and often defer medical payments due to higher priority living expenses, such as housing and transportation. Rental applicants with recent medical debt are up 5% from last year, impacting almost 37% of applicants nationally.
Since most property management companies overlook medical debts in their screening criteria, this trend tends to have a lesser impact on a property's applicant quality and acceptance rate. Ensure that your management company doesn't miss out on this enormous group of, in many cases, otherwise qualified applicants by taking advantage of medical debt filters in your screening process. Consult your screening company to determine if you currently score medical debts and whether it's advantageous to make this adjustment.
RentGrow is seeing the impact of the economy on applicant credit first-hand. By understanding these credit trends, you can better evaluate the renter applicant pool and adjust screening criteria to increase occupancy. Although the trends outlined above may not be visibly impacting your business at the moment, they may in the near future. As always, RentGrow will continue to monitor these and other trends to educate ourselves, our clients and the industry.
© 2010, RentGrow, Inc., Resident Screening Experts. A Yardi Company. Sign up to receive "In the Know". For permission to reprint this article please send your request to newsletter@rentgrow.com.
If you have additional questions about other aspects of your resident screening strategy you can contact RentGrow at 1-800-RENTGROW (1-800-736-8476) or visit our website at http://www.rentgrow.com. | 
