Have you ever considered reporting evictions to the four major credit bureaus? It’s not as difficult as you think, especially with the help of a credit reporting service. But first, it’s important to understand the credit-related effects of reporting evictions.
One of the questions consumers are most curious about is how long information stays on their report. This is especially true with negative items. No one wants one missed payment or collection account to hurt personal credit decisions forever.
Inflicting damage by reporting evictions?
As property owners and managers, you probably wouldn’t want to inflict that sort of lasting damage upon a tenant, either. Unfortunately, some tenants don’t give you any other option than to turn to alternative measures. This includes reporting evictions for recovering debt.
So exactly how long do records remain on a credit report? And how do you decide which avenues to pursue to collect from past due tenants?
Datalinx is a Seattle-based credit reporting service. We assist HOAs, property owners/managers, and other entities extending credit to consumers. Datalinx helps them report negative payment records to the four major credit bureaus. We’ve gathered the information you need to know when you consider reporting evictions or collections.
Accentuating the negative
Generally speaking, negative information stays on a consumer report for about seven years. This is according to Equifax, one of the four major credit bureaus. Negative items can include late or missed payments or accounts that have been sent to collections agencies. Situations when payments haven’t been paid as agreed, liens, or even bankruptcies are also negatives. Seven years can be a very long time. This is especially true when applying for auto loans, rental agreements, mortgages, or even jobs.
Each of these negative items not only will be listed as a red flag on a full credit report but will also drastically decrease an individual’s credit score. Some employers or organizations will listen to a consumer’s explanations or consider subsequent repayments of these debts. However, most simply cannot bend the rules to accept a score or report outside their established parameters.
Do they care about credit?
For some consumers, credit scores are simply not an issue. Either they have no need to apply for credit, or they have simply decimated their credit score to what they think is a point of no return.
However, most people do care about their credit, and understand the impact a negative item will have on their future. Today, credit card companies, banks, and free credit monitoring apps provide credit scores to customers on a regular basis. This indicates that more and more consumers are concerned about protecting their record.
Sometimes, simply notifying the customer that you report missed or late payments. Avoiding negative items on the four major credit bureaus’ reports will motivate them to pay on time. It certainly never hurts to remind them of your ability to report this information. Often tenants are under the false impression that rent payments are not reportable for credit bureau purposes.
However, services like Datalinx now offer property owners and managers the ability to report all payment histories, whether positive or negative. Informing your tenants that this is your practice and intention can make a big difference in the timeliness of payments, dues, and more.
Datalinx helps you turn negatives into positives
Often in situations of late or missed rental payments, property owners and managers forego attempting to collect from the tenant on their own and turn the account over to a professional collections agency. The owner or manager pays the agency a set fee or percentage of the amount collected from the tenant. The account is subsequently charged-off the books of the property owner or manager as a loss.
What does this mean for the consumer? First, the collection agency will report the account to the credit bureaus, and the debt will appear as a collection on the tenant’s credit report, instantly impacting their credit score. And, of course, this will be a negative item on the credit report for seven years from the date of the first missed payment.
Collections and delinquencies
If the tenant makes payments to the collection agency and pays the balance in full (usually including a fee from the collection agency), the agency will report this information as well. Paying a collections account may have a lesser impact on a credit score, but the item will still be reflected on the report.
There is another important, but often overlooked, aspect of this process. When an account is reported to the bureaus as a collection, it can never be anything but that—a collection. Datalinx recommends another alternative: consider foregoing the collection agency and reporting the past due account to the bureaus as delinquent.
Why? A delinquent, or late, payment has much less negative impact on a tenant’s credit report than a collection, especially when the delinquent account is subsequently paid in full. Offering this option to a tenant also gives you as the property owner or manager leverage to urge the tenant to pay to avoid a much more detrimental impact on their credit. You lose that leverage when you turn over an account to a collections agency.
Credit is king…or perhaps the ace
With a credit reporting service like Datalinx in your rental or leasing arsenal, you hold the proverbial ace in the hole when it comes to persuading your tenants to pay on time. For those who care about their credit score, reports of consistent, on-time payments is an unexpected bonus to help them increase credit scores and build a solid, long-term history. This may be the impetus needed to nudge those on-the-fence individuals to pay closer to their due date instead of waiting until the last possible minute. And for the others, your Datalinx account allows you to report negative items while maintaining leverage to collect past due funds—without paying fees to a collection agency.
With Datalinx, you hold all the cards.
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