Building a good credit score is a slow and consistent effort. Most renters are unaware they can build their credit score by requesting their landlords to report rent to all 3 credit bureaus – TransUnion, Experian, and Equifax.
Now, we know that renters can improve their credit score by reporting rent payments but what’s in it for landlords? For starters, landlords can lower payment delinquencies by 36%, while Tenants can increase more than 40 points in their credit score in a matter of months.
Despite the advantages, according to a survey conducted by TransUnion in April 2022 on how landlords, property managers, and tenants stand on rent reporting, it turns out that only 27% of property managers aware of credit reporting were doing it.
This article will focus on the importance of reporting rent payments to all three credit bureaus and how to do it. Let’s get started!
How Can Landlords Report Rent Payments To Credit Bureaus?
Landlords can only report rent payments to all credit bureaus if the tenants pay rent online and not in cash. The landlord must sign up for a rent-reporting service and add rental payment data. The reported data will become part of the tenant’s credit history.
This might seem like a lot of work, especially for landlords managing two or more properties. Thus, it is recommended to use a rent payment app. These apps have advanced features, such as automatically sending rent data, showing credit score increases, and reducing the frequency and impact of delinquencies. It is a win-win situation for both landlords and tenants.
Benefits Of Reporting Rent Payments To All Three Credit Bureaus
- Improves Reputation
Reporting rent payments helps you become a better landlord and improves your reputation. As stated above, only 27% of landlords report rent payments. By offering this service, you set yourself apart from your competition and help tenants achieve their financial goals. Thus, you end up increasing tenant retention.
- Encourages On-Time Payments
One of the most tedious tasks for a landlord is rent collection. Many tenants miss out on their deadlines and are reluctant to pay on time. By reporting rent payments, you can encourage on-time payments. For instance, when tenants know that late payments negatively affect their credit score, they will be more willing to pay on time.
According to the survey conducted by TransUnion, 73% of tenants are motivated to avoid missing a monthly payment due to rent reporting.
- Attract Higher Quality Tenants
You will surely find higher-quality tenants if you advertise your rent reporting service to your potential tenants. Why? Because these tenants are serious about their financial commitments and want to build their credit score. Thus, it’s more likely that they will pay on time, which will stabilize your rental income and save you from the hassles of rent collection.
- Better Landlord-Tenant Relationship
As stated above, reporting rent payments to all three credit bureaus results in a better landlord-tenant relationship. For instance, tenants are happy because their credit score is improving, which means they can get a personal loan, buy a car, or lower interest rates on mortgage payments. In contrast, tenants don’t have to deal with late payments or evictions and can smoothly increase tenants’ rent.
- Increases Property’s Value
Rent reporting increases the value of your property. This is correlated to timely payments and satisfied tenants. The more satisfied tenants you have, the more the chances of short or long term lease renewal. You can also save on the money and resources required to find and screen a new tenant.
Conclusion
Credit scores are an integral part of your life; thus, you need to develop new and innovative ways to build your credit score. Once tenants start reporting rent payments to all three credit bureaus, they can benefit from higher quality tenants, improving the rental market and earn rental passive income.