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Reporting Rent Payments: Better Cash Flow, Fewer Delinquencies, Happier Residents

“If you don’t take good care of your credit, then your credit won’t take good care of you.”

You know how…when a person has a mortgage and pays on-time, or late, their payment information shows up on their credit report right away – but if they’re a renter, they don’t get any credit for their rental payments. What if they did? What if, in paying their rent on time, they saw a boost in their credit score? What if property owners and managers could reward those residents who pay on time? What if the credit reporting gave them some leverage to help reduce delinquencies and collections? What if they could turn that service into an additional revenue stream? 

It turns out, the Fair Credit Reporting Act was amended in the early 2010’s to allow for the reporting of rental payments. A signed lease serves as the legal debt obligation. While that should have opened the floodgates for rental payment reporting, there were a few problems. 

  1. Getting a license to report to one credit bureau is a long process, riddled with a lot of paperwork. 
  2. There’s no short-term incentive for an already busy property manager to add credit reporting to their workload. 
  3. The data processing and formatting requirements are extremely complex. 

The credit bureaus do allow for a service called ‘data aggregation’ and that allowance was the genesis of what is now called CredHub. Before we delve more deeply into CredHub, let’s look at a month-in-the-life of a property manager and what it would look like to add credit reporting to their plate.

Most property managers spend the first week of the month collecting rents. Oftentimes they track their properties, residents, and payments in something called rent roll software. The second week of the month they spend tracking down the people who are late, by email, phone, and sometimes in-person visits. If a resident falls too far behind, they may have to post a notice or even initiate an eviction. In the meantime, they have residents moving out, maintenance requests, properties to clean and show, new resident applications to process, new residents moving in…the list goes on. Clearly, they are busy throughout the month. 

Now, according to the Kurz Group, rental delinquencies in recent history hover around 17% but got worse through the COVID pandemic. Imagine if you managed 1,000 residential properties and had to contact 170 of them each month by email, phone, or in person to collect the rent. That is a reality most property managers are used to. They consider it to be normal. It doesn’t have to be. 

An early iteration of CredHub piloted a program with a property management company in the Pacific Northwest that dropped their delinquency rate from 8.7% (which was already good) to less than 2%. They managed roughly 1,500 units during the period measured. See the graphic below because in this case, a picture really is worth a thousand words. 

Although it did take time, their staff went from having to follow up with about 130 residents per month to less than 30. The owner summed it up in a great analogy, calling “the positive aspect of reporting a carrot, and the negative reporting a stick.” Reporting their residents’ rent payments solved a few problems for them. 

  1. Improved cash flow – assuming an average rent of $1,000, that is a $100,000 improvement…per month! 
  2. Reduced the number of hours spent each month chasing down late rent payments – assuming 1.5 hours per resident, that is a reduction of 150 hours (about 6 and a half days) each month. 

Happier Residents 

Credit Score

At the same time, their residents noticed their rent payments starting to count and improve their credit scores. CredHub saw the same kinds of results as were reported in USA today: credit scores went up on average by 42 points. We’ve seen bigger credit score boosts, let’s take a look at an example. 

One resident recently sent us this screenshot from his Credit Karma app. He blurred out his credit score, but you can see that this is from October of 2022. The reporting of his rental payment information resulted in an increase of 69 points for TransUnion, and 67 points for Equifax. 

What kind of reward is that for a renter? A better credit score equates to lower interest rates on credit cards and other loans, which means lower payments and more disposable income.  

Our property management customers have told us of residents with improved credit scores being able to afford car payments, furniture, appliances, and TVs.  

This specific property management company was also able to add a nominal charge into the leases for the service, adding roughly $3,000 a month in additional revenue, on top of the improved cashflow and reduced hours spent on chasing late payments. 

Why wouldn’t a property management company just do this themselves? Why would they need a data aggregator like CredHub? Well, here’s the tricky part. The credit bureaus have a lengthy and cumbersome process for getting credentialed with them, and you must go through the process with each of the three bureaus: Equifax, TransUnion, and Experian. Their data processing and formatting requirements don’t integrate well with current property management software. The amount of time a property management company would have to invest on the front end to see results over the next 12-24 months just doesn’t pencil out. 

Enter CredHub. We saw the need and invested in a software-as-a-service platform that integrates with property management software, takes care of the data processing and formatting, and lends itself to an easy review process that takes about 15 minutes a month for the busy property manager. 

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.  

report rent on credit

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