This Solution Could Make The Rental Market Fairer For Tenants And LandlordsCould the current credit-based standard soon become obsolete? Giphy
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Whenever a landlord presents a new tenant with a lease agreement, there’s some level of risk. The new renter could cause damage, engage in illegal activity, or simply not be able (or willing) to pay the rent.
That’s why prospective tenants almost always have to provide a lot of information, including credit scores, before they’re approved. But critics say this isn’t always a fair assessment of an applicant’s qualifications.
And that’s where a startup company called Rent Butter comes in.
A novel strategy
While the founders of the firm understand that landlords need to evaluate risk before starting a new lease agreement, they believe there’s a better way than the status quo.
One of those founders, Tom Raleigh, was previously an attorney who worked on behalf of renters who fell on hard times and were saddled with devastating evictions or other credit report blemishes that made it difficult to secure another home.
“And that’s when the light bulb went off,” he recalled. “It was like, there’s got to be better alternative data out there to help tenants apply for a more stable housing environment.”
So he teamed up with a business partner and developed a strategy that involves looking at credit trends instead of cold, hard numbers.
What it provides
By providing landlords with access to an applicant's bank account information and certain other information, Rent Butter is able to show whether the individual’s credit is on the right track or not — even if it is less than stellar at the moment.
Some of the data included in the report reveals:
- Income vs. expense
- Rental payment history
- Overall credit use
With all of these factors on display, landlords can more accurately determine whether an applicant is safe or risky. And renters who might otherwise be turned away get a second chance.