The eye-roll-inducing assumption that people rent because they can’t afford to buy is not just elitist but completely false. Those of us in the industry know all kinds of people choose to rent for several reasons — financial flexibility, freedom to travel, access to more desirable areas — you name it.
And with renting stigma comes the unfair reality that — unlike their peers who pay mortgages — people who rent miss out on the insurmountable advantage of having their monthly housing payments reported to the major credit bureaus. In short, renters are denied the many financial benefits of building a positive credit history simply because they chose not to buy a house.
Fortunately, property management companies are renter-focused organizations. And now, many are partnering with third-party reporting companies, like CredHub, to ensure their renters enjoy the same financial opportunities as people paying mortgages.
Understandably, because rent reporting is a newer landscape for property managers and renters alike, there are several commonly asked questions about how rent reporting is offered.
And the answer to most of these questions is… it depends, which is great news for property managers and renters because you can do what works best for your business and tenants.
Whether it’s something you plan to make mandatory for all tenants or you allow them to opt-in or out, understanding the pros, cons, and implications of each option will help ensure you choose the proper rent reporting structure that benefits your tenants and serves as a new revenue stream for your business.
Let’s dive into how property management companies can offer rent payment reporting.
Option 1: Mandatory Full Rental Reporting
The ‘Mandatory’ in Mandatory Full Rental Reporting can make it sound like you’re forcing something on your tenants. But it’s a straightforward way to provide renters with an invaluable benefit and a great business strategy for attracting and retaining your ideal clients.
With mandatory full reporting, all tenants have all monthly rent payments — both positive and negative — reported to the major credit bureaus. We know this is a significant benefit for renters — it allows them to build up their credit history. It’s also a massive benefit for your business because it helps you attract and retain your ideal clients. People who appreciate the opportunity to build their credit history with on-time payments are the same dependable renters who plan to make their full monthly rental payments. In short, rent payment reporting creates a win-win for property management companies and renters.
And as a property management company, you still maintain the flexibility to withdraw records from reporting. For example, let’s say you have a long-term, reliable tenant who always makes their monthly rental payments on time. Then, a costly medical emergency or some other life event comes up, which means they might be behind a payment or two. However, because you have a good relationship, you’ve worked out a plan, and you don’t want them to be negatively affected with the automatic reporting that comes through. In this case, or any case, you still have the flexibility to report them as neutral for that month — strengthening your already healthy property manager-tenant relationship and helping a deserving person.
Property managers must decide whether to cover the cost directly or pass it on to the renter when providing mandatory rental reporting.
Property management companies cover the cost
“How, as a property manager, will I make more money by paying for a new service for my tenants?”
We’re so glad you asked.
Even if you choose to cover the cost of rental payment reporting directly, your business is bound to see an increase in revenue. In fact, property owners who use CredHub for rental payment reporting see a 50% reduction in rent delinquency on average. That’s a significant increase in monthly revenue, and it’s also time earned back that you’re not spending chasing down late payments. Plus, the new tenants you attract are more likely to pay on time.
Instead of covering the cost directly, you can also pass this expense on to the renter.
It’s important to note that there are specific regulations when going this route. Specifically, this can only be added as a mandatory fee for the renter when they start or renew their lease. It’s not legal to require them to start paying the fee mid-lease.
This, of course, means that property management companies are left to cover the fee until it’s time to renew. To help businesses account for this, CredHub offers a ramp-up payment schedule for the first year, so when you start, you’re only paying for a percentage of your total tenants. As the year progresses and more leases are renewed, your payment with CredHub increases. After a year, you pay the full fee with CredHub, but at this point, you’ve been able to onboard all tenants, and they are covering the cost.
Option 2: Renters Opt In for Rent Payment Reporting
Suppose you choose not to make rent reporting mandatory for all tenants. You can still attract and retain your ideal renters and create an additional revenue stream. How? By providing them with the option to opt-in for rent payment reporting.
When you offer tenants the option to opt-in for rent payment reporting, the renter signs up directly with CredHub, and we process the payment directly in our system. Much like mandatory reporting, you can view reporting as the property manager. And it’s still possible to mark someone as neutral for the month.
And the cherry on top — even when allowing renters to opt in, you can still build an additional revenue stream for your business. Your business can earn extra revenue by marking up the cost of monthly rent reporting beyond CredHub’s base price. This is still an excellent deal for renters — tenants typically see their credit score increase within just 6 months after opting in.
It’s important to note that because renters sign up directly with CredHub, we only offer this option to property management companies that meet the minimum unit requirement.
Option 3: Positive-Only Rent Payment Reporting
Considering everything we’ve discussed; some property management companies want to ensure that rent payment reporting will benefit all their renters. In this case, they choose positive-only reporting.
Positive-only reporting is like mandatory full reporting, but only positive rent payments are reported. If a payment is late or missed, it’s not reported to the major credit bureaus. Also, similarly, property managers can choose to cover the cost of reporting or to pass the cost on to renters — and must follow the same guidelines for each.
While positive-only reporting is an obvious benefit for renters, there are some things to consider. First, property management companies may miss out on attracting and retaining their ideal renters. Compared to renters interested in full reporting, those interested in positive-only reporting may expect to only sometimes pay in full and on time.
It’s also worth noting that the major credit bureaus prefer mandatory full rental reporting because when property management companies choose positive-only reporting, this skews their data. There aren’t guidelines or rules from the credit bureaus to discourage positive-only reporting, but there could be in the future.
It can’t be stated enough — rental payment reporting is win-win for both property managers and their tenants. Renters finally get to build up their credit history and improve their credit scores. Property managers attract and retain ideal clients, build a new revenue stream, and spend less time tracking down delinquent payments. People who appreciate the opportunity to build their credit history with on-time payments are the same reliable renters who plan to make their full monthly rental payments.
Whether it’s something you plan to make mandatory for all tenants or allow them to opt in or out of — working with an experienced reporting partner familiar with all scenarios is the key to leveraging rental reporting to grow your business.
If you’re a property manager looking to improve delinquency rates as inflation and rent prices are on the rise, if you’re looking for a way to improve cashflow and reduce the time spent chasing late rent each month, if you’re looking for a way to reward your resident who do pay on time, while adding a revenue stream to your bottom line. Look no further than CredHub – we give credit where credit is due. Schedule a Demo Today.
