{"id":131394,"date":"2020-10-31T15:00:17","date_gmt":"2020-10-31T21:00:17","guid":{"rendered":"https:\/\/www.biggerpockets.com\/blog\/?p=131394"},"modified":"2021-03-16T17:04:39","modified_gmt":"2021-03-16T23:04:39","slug":"should-report-tenants-credit-bureau","status":"publish","type":"post","link":"https:\/\/www.biggerpockets.com\/blog\/should-report-tenants-credit-bureau","title":{"rendered":"Why I&#8217;ll Always Report Rent Payments To Credit Bureaus"},"content":{"rendered":"<p>Whether you are a tenant or a landlord, credit history is necessary. Whenever someone applies for credit, a mortgage, or an auto loan, organizations check a person\u2019s credit history. And it doesn\u2019t matter the amount. It could be as small as a few hundred dollars or as much as a mortgage. By looking at someone\u2019s credit history, lenders can gauge the recipient&#8217;s likelihood of repaying the loan. They need to know what\u2014if any\u2014financial risks the person poses.<\/p>\n<p>There are compelling reasons to report a tenant\u2019s rent payments to credit bureaus if you are a landlord. Of course, deciding to report tenants might sound rather passive-aggressive. But there are several advantages for both you and your tenants. Some tenants may even want you to report their payments.<\/p>\n<p>Before exploring the benefits, let\u2019s get a better understanding of a credit report.<\/p>\n<h2>What Does A Credit Report Look Like?<\/h2>\n<p>There are five main parts to a credit report. They include:<\/p>\n<ul>\n<li><strong>Payment history <\/strong>&#8211; You see if a potential tenant makes all payments on time.<\/li>\n<li><strong>The amount owed <\/strong>&#8211; This is the total amount of credit a person has and the amount they owe. It\u2019s one thing to owe on a mortgage, but it\u2019s another thing to have a $10,000 limit credit card and only owe $1,000.<\/li>\n<li><strong>Length of credit history <\/strong>&#8211; A short credit history doesn\u2019t necessarily mean a negative report, but it is still considered.<\/li>\n<li><strong>New inquiries <\/strong>&#8211; This will depend on the type of inquiry. Applying for multiple new credit cards doesn\u2019t look good. In contrast, different inquiries on a mortgage could suggest a person is searching for the best option.<\/li>\n<li><strong>Type of credit <\/strong>&#8211; It is normal to have a mortgage and possibly even two car loans. Still, large debts on other kinds of loans or credit cards may suggest a person isn\u2019t financially savvy.<\/li>\n<\/ul>\n<p>The three main credit bureaus that include rental payments in their reports are Experian, Equifax, and TransUnion.<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"alignnone wp-image-95386 size-main-slider\" src=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2018\/01\/bigstock-192100351-702x336.jpg\" alt=\"credit report tenant screening\" width=\"702\" height=\"336\" title=\"\"><\/p>\n<h2>Why Report Tenants to Credit Bureaus?<\/h2>\n<p>The most significant benefit of reporting tenants\u2019 rent payments is that it <a href=\"https:\/\/www.biggerpockets.com\/blog\/encourage-on-time-rent-payments-9-tips-for-landlords\" target=\"_blank\">encourages on-time rent payments<\/a>. When tenants know they could be reported for late payments or not paying at all, it dramatically increases your chances of receiving the rent on time. So you don\u2019t have to worry about chasing up payments or charging late fees, which improves your overall service.<\/p>\n<p>There are some other compelling reasons to report tenants to credit bureaus as well.<\/p>\n<h3>1. Tenants can improve their credit score.<\/h3>\n<p>In April 2019, <a href=\"https:\/\/edition.cnn.com\/2020\/04\/09\/business\/americans-rent-payment-trnd\/index.html\" target=\"_blank\" rel=\"noopener\">statistics<\/a> showed that roughly 82% of tenants paid their rent on time. Reporting on-time payments is a massive advantage to the tenant because it will improve their credit score. A higher credit score increases their chances of approval for loans and mortgages in the future.<\/p>\n<h3>2. You can build better relationships.<\/h3>\n<p>Because reporting rent payments to credit bureaus encourages tenants to pay rent on time, you can focus more on the positive sides of being a successful landlord. Tenants can be happy that you\u2019re helping their credit score. You have more time for repairs and working at keeping your tenants happy.<\/p>\n<h3>3. You are helping the industry.<\/h3>\n<p>It\u2019s not always easy to find good tenants. However, because few landlords report rental payment history, it is difficult to get accurate information on a potential tenant\u2019s risk regarding rental payment consistency. If more landlords reported late payments, we all would have a clearer idea of whether the tenant will be a risk.<\/p>\n<p><em><strong>Related:<\/strong> <a href=\"https:\/\/www.biggerpockets.com\/blog\/evaluate-prospective-tenants-financial-situation\" target=\"_blank\">4 Ways to Evaluate a Prospective Tenant\u2019s Finances<\/a><\/em><\/p>\n<h3>4. It could be easier to rent your property.<\/h3>\n<p>A <a href=\"https:\/\/newsroom.transunion.com\/rent-or-buy-2017-begins-with-spike-in-number-of-renters-shopping-for-homes\/\" target=\"_blank\" rel=\"noopener\">2017 survey<\/a> by credit bureau TransUnion found that a slight majority of tenants want landlords to report rent payments. The survey showed that 51% of tenants would choose a property with payment reporting over one that doesn\u2019t. So reporting rent payments can give you an edge over your competitors.<\/p>\n<p>Because you are helping the tenant and the relationship is better, it is more likely that they will stay for longer.<\/p>\n<h3>5. You can encourage online rental payments.<\/h3>\n<p>Offering to report rent payments gives you an excellent opportunity to <a href=\"https:\/\/www.biggerpockets.com\/rei\/pay-rent-online-payment-tools\/\" target=\"_blank\">encourage tenants to pay rent online<\/a>. Paying rent online is safer and provides a digital copy of all your transactions. When you couple the option to pay rent online with reporting payments, more tenants will choose this option.<\/p>\n<h3>6. It\u2019s only fair.<\/h3>\n<p>Just as it is reasonable to report those who don\u2019t pay on time, it is the right thing to reward those who pay on time.<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"alignnone size-main-slider wp-image-94856\" src=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2017\/12\/iStock-512729160-702x336.jpg\" alt=\"Renting to tenants with pets\" width=\"702\" height=\"336\" title=\"\" srcset=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2017\/12\/iStock-512729160-702x336.jpg 702w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2017\/12\/iStock-512729160-1078x516.jpg 1078w\" sizes=\"auto, (max-width: 702px) 100vw, 702px\" \/><\/p>\n<h2>The Potential Negatives<\/h2>\n<p>It is safe to say that the positives do outweigh the negatives. Nevertheless, there are two things that landlords should bear in mind.<\/p>\n<h3>1. Some tenants won\u2019t be happy.<\/h3>\n<p>It is possible that the late payments don\u2019t affect the overall credit score of a tenant, but it will appear on a full report. Reporting late payments might upset the small handful of delinquent tenants who pay rent late.<\/p>\n<h3>2. The cost.<\/h3>\n<p>As you can\u2019t report directly to the credit bureaus, you will need to use a third-party service provider, which may incur additional charges. However, you can decide to share some of the costs with tenants.<\/p>\n<p>Many of the best rent collection apps or property management software have features that include rent payment reporting. If you use a rental app, check its features to see if reporting to credit bureaus is one of them. If not, contact your vendor to see if they can offer this service.<\/p>\n<p><em><strong>Related:<\/strong> <a href=\"https:\/\/www.biggerpockets.com\/blog\/reasons-tenants-leave\" target=\"_blank\">The 5 Most Common Reasons Tenants Leave Your Rentals<\/a><\/em><\/p>\n<h2>What To Do About Delinquent Tenants<\/h2>\n<p>It\u2019s never an easy decision to make, but it is essential to report delinquent renters. After all, your credit history could be at risk if tenants don\u2019t pay rent on time.<\/p>\n<p>First, check your rental agreement to make sure they are late. If you\u2019re using a rent collection app, this should be easy from the dashboard. It is also worth checking the laws in your state. Send a late notification and contact them by phone to confirm they have received the notice. Make sure they are fully aware of how much they owe and when you expect payment. It would be wise to inform them that you will report them if the payment isn\u2019t made.<\/p>\n<p>If you do report the delinquent tenant, don\u2019t forget your responsibilities. By law, you must inform the tenant of the report within 30 days of making it. It is also necessary for you to notify the right agency when the debt has been paid off.<\/p>\n<h2>Conclusion<\/h2>\n<p>There are many positive reasons to report tenants to credit bureaus. Tenants have a great incentive to pay rent on time, and they can improve their credit score. Also, by reporting rent payments to credit bureaus, you help the wider landlord community find the best tenants.<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"alignnone size-full wp-image-117195\" src=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2019\/10\/Signup_3.jpg\" alt=\"\" width=\"728\" height=\"90\" title=\"\" srcset=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2019\/10\/Signup_3.jpg 728w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2019\/10\/Signup_3-300x37.jpg 300w\" sizes=\"auto, (max-width: 728px) 100vw, 728px\" \/><\/p>\n<p><em>Do you think sharing information with credit bureaus can help or harm your relationship with your tenants?<\/em><\/p>\n<p><strong>Tell us why in the comments.<\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"<p>There are several advantages to credit reporting for both you and your tenants, but they come with some downsides.<\/p>\n","protected":false},"author":612767,"featured_media":118836,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[5183],"tags":[],"class_list":["post-131394","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-landlording"],"acf":[],"comment_count":0,"_links":{"self":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/131394","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/users\/612767"}],"replies":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/comments?post=131394"}],"version-history":[{"count":0,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/131394\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media\/118836"}],"wp:attachment":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media?parent=131394"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/categories?post=131394"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/tags?post=131394"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}