Why More Landlords Are Reporting Tenant Payment History to Credit Bureaus
If you compare the rental landscape from two or three years ago with the one today, many trends have emerged to protect property owners amidst unstable times. One of these trends that continues to gain momentum is landlord reporting of tenant payment history to credit bureaus. No longer does it only sanction tenants with poor payment history – although that’s a factor – but many more property owners recognize that when payments get recorded on credit, it changes the game.
Mortgage payments impact credit scores. So do car payments, credit card payments, and just about every other type of payment. For some reason, though, rent didn’t carry the same weight. You could pay your landlord $2,000 a month every month for five years, and it would go unacknowledged. On the contrary, you could skip 2-3 months, and as long as your landlord didn’t take you to court, your credit score remained free and clear of any sanctions.
That always seemed unfair to people. After all, rent for many people is the highest monthly bill anyone ever faces.
How Landlords are Changing Their Minds About Payment History
For too long, screening tenants was a one-time process for property owners. Check a credit report, confirm income, maybe call one or two landlords from previous addresses and hand over the keys. Anything else moving forward would only be a problem for the tenant.
However, past action is history. Someone with fantastic credit three years ago may have lost everything – and vice versa – with no recourse with today’s real estate. Someone who’s rebuilt credit since but has negative findings on their report won’t fare well with today’s property owners.
Thus, more landlords are considering rental payment information a two-way street. They’re not only using a credit report at initial turnover to assess risk but are also contributing to that report by writing down payment information every month.
And statistics back this up. According to various industry surveys, properties with payment reporting features boast less late payments overall; some landlords reported over 20% on-time payment increases after starting this process. That percentage is substantial for those with multiple properties.
What Really Gets Reported
This is the tricky part because not all systems report information the same way. For example, one landlord might only report negative findings – someone’s 30 days late or moves out without paying – but if they pay on time every month for a decade, it doesn’t show up on credit.
However, systems that report everything – positive and negative payments – can get tenants’ rent paid time on their credit histories. When landlords know that tenants are considerate of their potential credit score, landlords feel encouraged as well since all payments matter.
So if you’re wondering how to report unpaid rent to credit bureau systems, it’s easier than it seems when learning the best ways to submit information to Equifax, Experian and TransUnion. Most services handle the technical aspect; landowners only need documented records of transactions and legal compliance for substance.
Why Tenants Care More Than Ever
This is where the change occurs because tenants weren’t always aware of credit maintenance. In today’s world, people track their credit scores via apps. A great score saves people 2-4% interest on car loans and gets them better rental situations down the line or even cheaper insurance in certain states.
When landlords get the impression that tenant payments show up on credit reporting, tenants start viewing rent differently. It’s no longer money just paid to live somewhere; it now travels with them throughout life.
Thus far, property managers have noticed this appreciation among tenants. For example, tenants now ask upfront whether payments get reported at all (and some see it as a positive because they want the credit building for themselves). Others get serious about maintaining payments on time; they never wanted anything bad reported on their credit in the first place.
Thus, the psychology plays into how people value payment as not just another aspect with late fees or angry landlords. If it impacts future goals, it moves right up to the top of priority payments alongside credit cards and car payments.
The Legalities Landlords Need To Understand
No one can just start reporting information willy nilly. Certain laws exist through Fair Credit Reporting Act regulations that benefit both parties – but primarily favor tenants if there’s a lack of notification or an error in record keeping/monitoring. This can lead to lawsuits that no property owner wants.
Thus, most landlords get around this by using a specialized service. Rental payment reporting services understand compliance and technical requirements for information submission and can deal with disputes if tenants think incorrect information has entered their files.
A lease can help (most states don’t require tenant notification in advance but it’s highly recommended to have it included regardless). This way, more expectations set forth from day one can ward off people who may have anticipated non-compliance in the future.
Does It Really Help With Collections?
This is what most landlords want to know. If I report someone’s not paying rent to credit bureaus, will I ever see a dime?
The simple answer is sometimes. Credit reporting isn’t an instant cure for someone who needs money but isn’t paying rent regardless of intention. However, if someone is financially able to pay but just doesn’t want to or has prioritized other bills over rent (among others), then credit reporting can motivate steps forward.
In fact, it’s better for prevention than collection purposes; when people know their history will be reported, they’re less likely to fall behind in the first place – which means fewer landlords chasing payments and evicting bad tenants and more predictable cash flow.
Some property owners also use this tool as leverage when negotiating payments; if someone owes back rent but a payment arrangement will suffice (non-reporting efforts), that can help facilitate an arrangement since the tenant wants their credit protected while the landlord wants their money without evicting them.
The Bottom Line For Property Owners
While tenant payment reporting is not suitable for every landlord or situation, sometimes smaller landlords with only one or two properties find the compliance hassle not worth it because it costs between $5-$25 per unit per month for payment reporting services.
In contrast, bigger companies or chronic-late-payment landowners find that approved payment increases often give back what’s spent in collection efforts. Fewer payments mean more predictable income and less time spent on collection efforts – especially when knowing this option is there provides more confidence in running a successful rental business.
Moreover, as this trend continues with those who take advantage of systems in place – for those tenants who once thought payments would not show up on credit like any other major bill – they’ll soon realize otherwise due to expectation shifts at independent homes across the country.