Am I stepping over the line by helping tenants build credit?

18 Replies

I volunteer some of my time at a local nonprofit helping others rebuild their credit and get their life back on track.  After I screwed my credit up so bad in my early twenties I feel it's only fair I help others so they don't make the same mistakes I did.

After having to explain to quite a few tenants how important credit is and what a credit score is I have prepared a small packet for all prospective or current tenants that gives them information on helping to improve their credit.  I hate to see some people give up when sometimes it's just getting things disputed or setting up payment plans to catch up on bills.  Some banks do it for free too.

Does anyone else do anything like this or am I just asking for trouble?

I think it’s a noble effort . I like you help your community.,however you must really be careful when you start mixing business with personal stuff . Handing out a packet is one thing but actually interceding into the tenants personal business of accounts and collections is not a good idea . Most renters are renters for a reason sad to say 

Originally posted by @Brent Paul :

I volunteer some of my time at a local nonprofit helping others rebuild their credit and get their life back on track.  After I screwed my credit up so bad in my early twenties I feel it's only fair I help others so they don't make the same mistakes I did.

After having to explain to quite a few tenants how important credit is and what a credit score is I have prepared a small packet for all prospective or current tenants that gives them information on helping to improve their credit.  I hate to see some people give up when sometimes it's just getting things disputed or setting up payment plans to catch up on bills.  Some banks do it for free too.

Does anyone else do anything like this or am I just asking for trouble?

I have heard that you can also report on time rent payments to credit bureaus and help your tenants build their credit that way as well. 

 

@Brent Paul I love this! I agree with @Anthony Gayden - you can help them build credit by reporting rent payments to credit bureaus but I'm not quite sure what that entails. 

As far as the credit packet, it's a great way to separate yourself from the other landlords. You can use this as your niche. Some landlords tailor their processes and systems to add value to students while some tailor them towards Section 8. You can stand out and be known as the landlord that will help rebuild credit. 

I would just make sure if you do anything further that you're in compliance with the state and local laws. 

Great to see landlords that want to help out their tenants!

@Cameron Tope @Dennis M. @Anthony Gayden   Thanks guys.  I find a lot of people are very discouraged and don't know where to start when it comes to rebuilding their credit.  I made sure none of it references the nonprofit.  It would be great to see someone come back a year later and rent from me or buy their own house.  There is a big for profit firm here that people pay thousands of dollars to fix their credit.  Seems silly when all the resources are free.

I didn't realize there was a way to report rent and build credit. I will have to check that out.

The plan isn't to push this hard into every tenant but if someone does inquire about rebuilding credit I can give them the packet to guide them part of the way.

If you set up rental payments through Cozy, that website will take care of posting that "positive" on a tenant's credit report.  I believe it is technically in the category of the tenant making a payment on a line of credit.  There is no charge to the tenant, as long as they set the payment as an ACH from their bank account.  Though they can also pay with a credit card (charge for that).  And no charge to the property owner, unless they want the payment faster, and then there is a small charge.  I think $3 or $4.  They do not post negative information, whether a tenant misses a rental payment or not.

I don't require my tenants to use it, but I strongly encourage it and point out it's an easy way to build/improve credit for a bill they're paying anyway!

This is definitely a great way to set yourself apart from other landlords. Rent is generally the biggest monthly expense for most renters in the United States, however, when rent is paid on time, traditionally it isn't taken into account unless a landlord has proceeded through the lengthy process of reporting negative payment history (and even then there are still some restrictions). 

Some of this does depend on the tenant's current score (so, if it is a high score already, might not have as much of an effect, but if you have someone in the vicinity of 650 - 710, reporting those on-time rent payments may go a long way). And think about it from the tenant's side: Future landlords would be able to verify that they're a reliable tenant who pays rent on time, (and now they have a credit score to show for it); with a higher score, they can finally sign documents, loans, and policies without the need to find a cosigner; they'll be able to save more money on interest rates and fees when applying for credit cards and loans; etc. - definitely worth considering because, as mentioned above, it helps you to stand out as the landlord too when you let tenants know that they can build positive credit with their biggest monthly expense. @Brent Paul

I think its great that you are helping people rebuild their credit....but I would be careful mixing that with your business, other than some basic tips, referral to some resources and doing online payments that register with the credit bureau's.

Just avoid being sucked into being some form of consultant that walks them through the process and responds to every question or concern they have...that's getting a little too personal to mix in with your business. Providing them some resources and automated services like COZY and then stay "hands off". Dealing with details of tenant finances and all the drama that can come from that is a path to becoming too emotionally involved with a tenant.

@Brent Paul , it's a great idea.  If you can help others, why wouldn't you?!

Exactly what you're speaking of is something we discuss internally at Burbz.  We want to help tenants build their credit.  That's why a lot have to rent.

Talk to Shiva Bhaskar.  His business works to help people rebuild their credit.  Smart guy but also just a down-right awesome person!  I can't figure out to @ him so I'll provide his profile link: 

https://www.biggerpockets.com/users/ShivaB#0

Yes!  This is such an amazing idea!  It builds trust between you and your tenants.  I hope it brings you the opposite of trouble, brings you good fortunes!

@Brent Paul no ice done it and offered free credit repair rebuilding and sold them the house

. There is a 100% free credit repair rebuilding company out there , I can't post or I would,but there just as good as the big credit repair companies. 100% free web search free credit repair .

I would not personally interact with my tenants with any form of personal, financial or life training but providing them with an onboarding package of information so they can educate themselves and learn about resources sounds like a good and noble thing to do. 

@Brent Paul

My first tenant had pretty bad credit to begin with. I looked at other variables when screening and they signed a lease. I never offered but when he reached out to me asking questions I offered guidance. I was just at the property last week and he was excited to tell me his score which is as good as mine now. I think it’s great. They have been great tenants and I’d love for them to stay but they eventually want to buy a house. If someone truly wants help and I can offer it, why not?

@Brent Paul

Giving to others who are disadvantaged is praiseworthy. But you have a business to run, your contributions to society should be completely separate. It's just the right mindset to have when running a business, even if you don't see any harm in this particular case.

Originally posted by @Brent Paul :

@Cameron Tope @Dennis M. @Anthony Gayden   Thanks guys.  I find a lot of people are very discouraged and don't know where to start when it comes to rebuilding their credit.  I made sure none of it references the nonprofit.  It would be great to see someone come back a year later and rent from me or buy their own house.  There is a big for profit firm here that people pay thousands of dollars to fix their credit.  Seems silly when all the resources are free.

I didn't realize there was a way to report rent and build credit. I will have to check that out.

The plan isn't to push this hard into every tenant but if someone does inquire about rebuilding credit I can give them the packet to guide them part of the way.

 Noble goal! Don't lose that passion!

I think it's amazing to help tenants out any way one can. 

So far you keep it at that and no co-mingling personal and professional relationships because then it can become a slippery slope when some tenants perceive the smallest gesture as a "weakness". Of course, most tenants are reasonable; however, some tenants will try to take advantage. Seen this too many times. Even just one simple act of kindness, it's weird. 

But the simple value of fair, but firm works all the time!

@Brent Paul I use Cozy for rent payment and they report to the bureaus. I market that as an advantage of renting from me, that you can help repair your credit. I see nothing wrong with giving your tenants tools or information to help them rebuild their credit. I would stop short of counseling or more personal interaction. I am always willing to help people, but in my experience most people don't want help or advice, which is why they get stuck. Great that you are helping out.

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