Property managers don’t have time to chase down rent checks from every resident in their building each month, nor do they have the time to take on additional administrative tasks related to running their property. They also can’t afford to miss rent payments from delinquent residents. Property managers do their best to encourage on-time rent payments from residents, but at the end of the day, there’s only so much they can do to collect on time. Enter rent reporting.
Rent reporting is a rapidly growing offering in the multifamily rental market that has proven to be a highly effective means of attracting responsible residents and encouraging them to pay rent on time. By adopting technology that automatically reports rent payments (or lack thereof) to the credit bureaus, property owners can offer residents a compelling amenity and see increases in net operating income (NOI).
What is Rent Reporting?
Lenders of nearly every credit product on the market, from credit cards to car loans to mortgages, submit a borrower’s record of on-time and late payments to the credit bureaus. These reports directly affect the borrower’s credit score and ability to secure additional credit.
Rent payments, however, are not traditionally reported to credit bureaus, even though rent reporting can be incredibly beneficial to property owners and residents.
So how does rent reporting work? Depending on the type of rent reporting offered, property owners report only on-time (positive-only rent reporting), or on-time, late, and missed payments (full-file reporting) to credit bureaus, which creates an opportunity to increase a renter’s credit score for each on-time payment or ding their credit score for late or missed payments.
All three major credit bureaus, Experian, Equifax, and TransUnion, accept rent reporting tradelines. Rent reporting becomes most advantageous for renters when property owners submit their payment histories to all three bureaus.
Why is Rent Reporting Important?
It’s important for individuals to establish good credit because lenders often look to their credit score when determining eligibility for a loan. But establishing a good credit score takes time — and requires opportunities to make timely payments to entities that report to credit bureaus. Without rent reporting, renters have less opportunity to increase their credit score.
Many property management companies have acknowledged this gap and begun offering rent reporting services to their residents, providing them with the opportunity to build their credit score.
While legislation around rent reporting is still developing, some states are beginning to recognize its value in promoting financial inclusion and stability in the rental market. In California, for instance, California Civil Code § 1954.07 states that property owners must offer residents the option to have positive rental payment information reported to at least one nationwide consumer reporting agency. In Missouri, House Bill 938, which has not yet been passed, aims to establish similar requirements, reflecting the principles outlined in California’s legislation.
Key Benefits of Rent Reporting for Renters
Rent reporting creates a tradeline for all renters, including those with little to no credit history. It allows renters to establish themselves as fiscally responsible borrowers and increase their credit score by as much as 33* points after 12 months of on-time payments without taking on any debt. That, in turn, helps them secure leases in the future, and qualify for better credit cards, loans, mortgages, and insurance premiums. It creates a long-term, positive impact on their overall financial well-being.
It should be noted that rent reporting is most advantageous when payments are reported to all three major credit bureaus. When pulling credit scores, some banks may only check with one bureau, so renters may miss out on the financial benefits of rent reporting if only one credit bureau has a record of their consistent, timely payments.
Benefits of Rent Reporting for Property Owners and Managers
Offering rent reporting can help property owners attract financially responsible renters and encourage on-time payments. One TransUnion survey found that 73% of respondents would be more likely to make on-time rent payments if property managers reported rent payments to a credit bureau, and 67% would choose a unit that offers rent reporting over a similar property that doesn’t. In an increasingly competitive market, rent reporting is an amenity that can help differentiate properties.
By gaining a credit boost for on-time payments, renters are not only incentivized to pay on time, but they are also incentivized to stay in their building. Rent reporting increases resident retention and cuts back on the administrative effort and cost of continually listing rental units and finding new renters.
Paying for rent reporting services can be an out-of-pocket cost that delivers excellent ROI. But depending on state and local laws, property owners and managers may be able to pass on that cost (with an extra fee)to residents, generating an ancillary income stream.
How to Get Started with Rent Reporting
There are a number of companies that offer rent reporting services to help property owners offer this valuable amenity with little to no effort. Here’s what to consider when looking for a rent reporting vendor:
- Reporting to all credit bureaus: When banks are pulling credit scores to determine loan eligibility, they may only contact one credit bureau. To provide maximum benefits to residents, make sure the rent reporting vendor submits payment histories to all three major credit bureaus.
- Easy enrollment: Property owners don’t need to take on additional work to offer rent reporting. The right solution integrates seamlessly into your leasing workflow, making it easy to set up and manage, so you’re adding income and security without taking on additional work.
- Opt-out feature: Many studies have shown that there are significant benefits to offering an opt-out model, meaning residents will be automatically enrolled in the rent reporting program. Opt-out models result in higher participation rates, less administrative work, and encourage beneficial behaviors without asking individuals to make any decisions. Note, this feature is not available in every state.
- Customer experience: Even when using the most reliable and intuitive technology, questions and challenges can arise. Rent reporting service is no different, and only the vendors that offer top-notch customer service are worth your time.
- Resident portal: To limit the burden of managing rent reporting service, look for a vendor that offers a resident portal where renters can see the impact of their on-time payments and make changes to their enrollment.
The Future of Rent Reporting
Though rent reporting is generally not required for property managers, California has already implemented a rent reporting requirement and states like Missouri are considering similar measures. Rent reporting helps close financial gaps for renters, encourages on-time payments for property owners, provides more data for credit bureaus, and helps stabilize the rental property market by increasing resident retention. It’s a win-win-win offering, so it's quickly becoming the new norm in the multifamily housing industry.
Foxen Rentistry is a leading rent reporting solution that allows residents to build credit and improve financial wellness while increasing timely payments for property owners. Our customer service team helps you quickly and easily stand up your program, which auto-enrolls residents at the time of lease signing.
Not only can you earn ancillary income and attract financially responsible residents with this amenity, but you can increase the frequency of timely payments and provide incentives for your best residents to stay in your building, cutting back on resident turnover costs.
Get Started with Foxen
Learn more about how Foxen can help with your rent reporting needs at foxen.com/rentistry.
*Rentistry’s impact to properties may vary. Increases in credit scores reported by renters using Rentistry may not be solely attributable to Rentistry's rent reporting services; other factors such as existing debts, new credit inquiries, or payment history of other accounts may also contribute to score changes. The impact of rent reporting to renters may vary based on the credit agency receiving the history and the renter’s unique credit profile. Results are not guaranteed and may differ based on the individual renter.
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