Owner of Rhino Realty Property Management and Rhino Realty B&B, entrepreneur, investor, advisor, author and speaker.
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As one of the fastest-growing groups of renters, Gen-Z is entering the market and putting pressure on property managers to start reporting rent payments to the major credit bureaus. Gen-Z is paying higher rent than any other age group, and many want credit for those payments.
Since early last year, financial institutions and credit reporting agencies have been changing policies to create greater financial inclusion. Financial inclusion is an effort to address economic inequality and promote economic growth by ensuring that everyone, regardless of income level or location, has access to financial services. Greater financial inclusion can improve the quality of life and long-term financial health of younger people and is good for the market overall.
In 2022, all the major credit bureaus began including rent payment information in credit reports and in the calculation of credit scores. Rent payment information will be included if the payments are reported, but there is no legal requirement for property managers and landlords to report. Should you report your tenant’s rental payment history to the credit bureaus? The short answer: Yes.
Benefits For Property Managers
I find there are just as many benefits for property managers as for tenants. Reporting to credit agencies can encourage tenants to make on-time rent payments because they know that their credit scores will be impacted by late or missed payments. Less late, partial and missed rental payments save property managers time and money trying to collect payments.
Rent reporting can also make rental payments more transparent. This makes it easier for landlords to verify that tenants have a history of paying rent on time. This could make it easier for landlords to rent to tenants with a limited credit history or poor credit. Offering rent payment reporting can also set you apart from your competition and help you to attract and retain higher-quality tenants. I find that both Millennials and Gen-Z, the two largest populations of renters, are actively seeking rentals where their rent payments will be reported.
Benefits For Tenants
Up until the past year, tenants have been the ones mostly spearheading the movement toward reporting rent payments. For younger tenants, rent is the largest recurring monthly expense that they make, and reporting on-time payments to the credit bureaus can have a significant impact on credit scores. Renters in the younger age groups are more likely to have lower or invisible credit.
Growing up in a time when their parents were over-extended and focused on paying down debt, many have been focused on limiting the amount of debt they take on. I think this is a responsible financial practice that shouldn’t be penalized in credit scoring. Good credit can lead to better financial products, such as lower interest rates on loans and credit cards. Rent reporting can help renters with a limited credit history to access better financial products that they may not have been able to qualify for otherwise.
How To Start Reporting Rent Payments
Because renters can’t report their own payments, the responsibility for reporting falls to the property manager. Luckily, there are many property management systems that can collect rent and report payments directly to credit bureaus.
Note that rent payment reporting can’t be done from peer-to-peer payment apps like Zelle and Venmo, though. The added bonus to dedicated software is that setting up a payment system can decrease late and partial payments because renters can access all payment information in one place and even set up automatic payments.
If you don’t use or want to use an online payment system with this capability, you can submit rent payment reports using a standalone app. These are relatively inexpensive, and I find that they usually pay for themselves.
When setting up credit bureau reporting, consider whether your software reports both on-time and missed payments or only on-time payments. Reporting all on-time and late rental payments will give you leverage that can help you put more pressure on your tenants to keep up with payments.
If you aren’t currently reporting rental payments to credit bureaus, I think this is a relatively easy step that you should consider. While reporting this information is not required, there are benefits for the property manager, tenant and the larger financial market.
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