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Credit in Crisis:
How COVID-19 Has Changed the Credit- Checking and Screening Process
Nby David Crown
ow more than ever, researching the credit of rental applicants is essential to choosing the most qualified tenant for a vacant apartment unit. Credit-checking has never been able to tell you everything you need to know
about an applicant, but historically, it has provided important information in the selection process.
The pandemic, however, has complicated things where credit is concerned. Millions of people were unemployed for a year or longer due to shutdowns for public safety, and they have relied on assistance programs to continue renting their residences. Many still do. We think of our current time as “post-COVID,” but in truth the pandemic is not over yet. As property managers, the question we should ask ourselves is: what do these changes in the effectiveness of credit checks mean for our industry? Let’s explore some information that’s pertinent to answering that question.
Credit Scores Might Not be as Effective...For Now. Joelle Scally, a Financial and Economic Analyst for 90 NOVEMBER 2021 - APARTMENT MANAGEMENT MAGAZINE AMM3
the Federal Reserve Bank of New York, has said publicly, “[Credit scores] are a really important tool for lenders to identify creditworthy borrowers, but with the protection of the forbearance programs some of that may be muddled.” Given that typical indicators of poor credit (such as unpaid rent and other outstanding payments) do not have the same implications right now due to the circumstances of a global pandemic, it makes sense that credit scores are not as cut-and-dry as they usually are. A permanent weakening of credit scores as a tool would cause a significant shift in the way property managers and property owners evaluate applicants, but fortunately that’s not in the forecast. The efficacy of traditional credit scores will return, and in the meantime, banks are in the process of developing more holistic tools. That leads me to the next key factor.
New Models Are Incoming. Financial institutions are hard at work developing data-driven analysis models that will provide a more accurate credit risk assessment than current systems. Basically,
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