Rent is one of the largest monthly expenses for any person or family; it’s also been one of the largest sources of credit payments that haven’t helped those same people build a solid credit score – until now. While these numbers positively impact tenants, they inadvertently help landlords and property managers even more.
It’s a simple process. When landlords submit tenant rent payments to credit agencies, this acknowledges monthly transactions on a tenant’s credit report just like a car loan payment or credit card payment. Thus, while such a process sounds like a tedious addition to any accounting realm, it has benefits that simplify property management and secure financial leverage for tenants.
Why Tenants Want Their Rent Reported
It’s generally safe to say that the majority of tenants pay their rent on time every month. It’s a priority above all else – and if it isn’t, no one wants to risk being kicked out of their homes. Yet no matter how reliable a tenant is with their rent payments, that money makes landlords wealthy, but it does nothing more than go toward credit reports for properties without any other financial advantage to tenants.
When rent is reported to credit agencies, suddenly, a reliable tenant has proof of reliable payment. For those paying $1,500 or $2,000 a month continuously, that’s a record of reliability that creates a payment history over time. This constitutes as payment history positive factor for anyone building credit or trying to rebuild credit.
This is especially true among younger tenants just starting their journeys. A recent graduate may not have any credit history aside from student loans and new credit accounts. Therefore, after two years of reported rent payments, they acquire income stability to show. The same goes for new residents needing to establish credit in their new country or anyone recovering from prior debts or bankruptcies.
The Landlord Advantage Nobody Talks About
Now a landlord may think that reporting payments creates more work for management just for their tenants. However, landlords who’ve incorporated this option find that benefits come from unexpected revenues.
For example, tenants are more likely to pay their rent on time each month when they know it’s acknowledged on their credit reports. It’s human nature; when something matters to one’s credit score, they’ll ensure it’s taken care of on time without penalty. This means that the property manager is less likely to have issues with late payments when the stakes are high.
But there’s more. Many landlords who report rent payments to credit bureau systems find that it gives them an edge when marketing their properties; tenants actively seek rentals where rent will be reported. Therefore, in competitive markets, this can help.
Think of it this way: two apartments across the street from each other are relatively the same in pricing. One landlord reports rent payments and one does not. Which apartment will the tenant rent? Obviously the one where rent will be reported – especially if the tenant is mindful of their credit score and overall financial future.
How Payment Behavior Changes
Tenants who have to pay the same amount every month will pay it on time because they did last month and the month before. Payment reporting offers peace of mind for property managers who report that tenant behaviors change surrounding monthly payments.
Not that those who were great tenants paying on time now suddenly become more reliable; they were great tenants to begin with. However, better tenants become even better tenants by not falling into the complacency mindset while simultaneously reporting prevents tenants from wanting to pay a few days late without someone sending a friendly reminder. When there’s a difference in someone’s credit score with potential for negative impacts, rent increases in significance to avoid paying late fees.
For property owners with multiple properties, this means less time spent chasing payments and having those awkward conversations about late fees due.
Building Better Long-Term Relationships
Tenants want their landlords to care about their well-being, and those willing to report rent payments show they care because that’s better for tenants’ financial future than it is beneficial for the property owners getting payments each month.
Tenants appreciate a landlord who helps them build credit through on-time payments reported to agencies. When this notion is presented from the get-go, it shows that landlords care about more than just receiving payments each month; it makes tenants grateful and positive tenants remain in properties longer, renew leases more often and cause less disturbance – meaning fewer noise complaints, lease breaches, etc.
Since tenant turnover is expensive – and every time someone moves out, new cleaning charges are required, potential new repairs will need to be made and vacancies caused – it’s essential to find good tenants who will remain long enough for landlords to save money over time.
The Screening Process Gets Easier
Not too many people discuss how better screening occurs based on reported data. Someone who has two years of rental history with another landlord reporting their timely (and sometimes not timely) rental payments works better than someone with credit accounts or even their own credit accounts.
You can see how they acted toward their rental obligations – if they had occasional late fees or consistent on-time fees – and this information is much more credible than any credit or student loan management they may have had.
Ultimately as more landlords report rent payments to credit agencies as a means of routine process, this creates a cyclical positive reinforcement where better screening creates better renting experiences creates less stress for everyone involved.
Addressing Common Concerns
Some landlords are concerned that when reporting rent payments, they’ll have to report negatively as well – meaning missed or late payments will also be sent (which is true). However, this is not a bad part of the equation – reporting works both ways and that’s how it’s effective.
Reporting helps create an incentive for timely payments but as a landlord, any inconsistencies are well documented should issues arise at a later date; every piece gets timestamped – and rightly so – as notes show if late payments start falling into patterns.
Other landlords worry about increased responsibility; many reporting agencies have transformed this process into minimal hassle with many integrating directly into management software or payment systems where straightforward reporting occurs via backend integration. The average person won’t need to think about it after initial setup.
Creating Win-Win Situations
Rent becomes an even larger win-win situation when landlords get their rent reported by acquiring tenants with timely payments that appreciate attention; likewise, tenants acquire safe spaces and well-cared-for properties from attentive landlords willing to secure practical opportunities like reporting rental as another facet of financial success.
As such, any landlord who wants quality candidates down the line will find this simplistic solution allows something else valuable to differentiate properties from others.
Tenants want what’s best for their financial futures and considering that their most significant monthly expense is now turned into reported value for their future by credit agencies that once turned a blind eye, it’s a win-win for everyone involved.
It’s only uphill from here as these assessments grow within the rental world as agencies begin reporting now and why shouldn’t everyone involved benefit?
