If you’re a rental property manager, chances are you have a significant number of millennial renters. More millennials, the generation born from 1981 to 1996, are choosing to rent apartments and homes instead of buying. In fact, more than 82% of millennials believe paying rent is cheaper than a mortgage payment. Demand for apartments is up 11% since 2018, and average rents have increased by 3%.
This growing trend is great news for rental property owners and managers. This seems to indicate you’ll have plenty of long-term tenants, and maybe even a substantial waiting list. You might even be able to increase monthly rents. The potential problem, though, lies with another growing trend among millennials: poor credit.
The greatest debt generation
According to an April 2019 report by Experian, one of the four major credit bureaus, millennials have an average FICO score of 665. This is much lower than the national average of a 701 FICO score, and the 732 average score of baby boomers. And the outlook isn’t much better for the upcoming “generation Z.” Although they’re still young — about 18 to 22 years old now — they’re averaging the same scores as millennials.
This disparity is most likely due to the amount of debt millennials carry, including:
- $4,869 average credit card debt,
- $34,770 in average student loan debt, and
- $80,666 total debt on average.
Because these totals raised by 7%, 8%, and 11%, respectively from 2017 to 2018, these averages are only expected to rise.
As a property owner or manager, you may have already faced difficulties qualifying millennial renters based on their credit scores or debt-to-income ratios. On the other hand, your existing millennial renters might be some of your most stable tenants. They’re in no hurry to move on to a starter home.
Reporting millennial renters
Despite their lower-than-average scores, millennials do care about their credit. They’re even actively looking for ways to increase their scores. That’s why the credit agencies are creating programs like Experian Boost. They want to help millennials get credit for things they’re already doing, like paying utilities and mobile phone bills on time.
You could offer the same benefit to your tenants by reporting their rent payments to the four major credit bureaus. Most tenants don’t know that it’s possible for their landlords to report their rent payments. Some landlords don’t even realize that it’s an option, or believe it’s too difficult.
To start reporting to the credit bureaus, you’ll need credit bureau reporting software. The bureaus require credit data to be sent to them in a specific format called Metro 2. Credit bureau reporting software takes your tenants’ data and converts it to Metro 2 format.
The best way to get started is to work with a credit reporting service company like Datalinx. We provide credit reporting software that seamlessly integrates with your existing systems. We also work closely with you to ensure your data is sent accurately and on time.
Another reason to start reporting
Even if you start reporting credit as an incentive to help your millennial renters raise their scores, you’ll benefit in other ways. You can also report tenants who consistently pay late or miss payments, in addition to reporting evictions. These negative records can impact tenants’ credit reports and scores for up to seven years. This alone is sometimes enough incentive for tenants to start paying in a more timely manner.
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