An unfortunate reality of property management is the inevitability of dealing with slow-pay and no-pay tenants. Even though a tenant may pass your initial creditworthiness processes at application time, it’s impossible to predict if circumstances or intentions will change and the tenant will become a problem payor. When that happens, you have a couple of options. One is reporting tenants to the credit bureaus.
Sure, letters, increasingly serious notices, personal visits, and stern phone calls are always the first steps to collecting, but what happens when those don’t work? Many property managers turn to collection agencies. However, more and more are opting to report delinquent payment histories to the big credit agencies using credit reporting services like Datalinx.
Some property management organizations assume that credit reporting isn’t an option for them. Either they think their reports will be too small to be accepted, don’t think they qualify as a creditor, or simply don’t know where to start. Companies like Datalinx acknowledged these issues. Since 2001 has been refining the process to make reporting to the big credit bureaus easy and affordable. This, in turn, makes this a very powerful and effective solution.
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. Fortunately, those types of tenants probably wouldn’t have made it through your application process to begin with.
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 now report to the four credit bureaus 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 can make a big difference in the timeliness of payments.
Long-term effects
There’s one particular question consumers are most curious about when it comes to credit reporting. That’s how long information—especially negative information—will remain on their report. No one wants one missed payment or collection account to impact personal credit decisions forever. Unfortunately, some tenants don’t give you any other option than to turn to alternative measures for recovering debt.
Negative information remains on a consumer credit report for about seven years according to Equifax. Equifax is one of four major credit bureaus. Negative items can include late or missed payments, accounts that have been sent to collections agencies, situations when payments have not been paid as agreed, liens, or even bankruptcies. Seven years can be a very long time for anyone. This is especially true when applying for auto loans, rental agreements, mortgages, or even jobs.
Each of these negative items will be listed as a red flag on a full credit report. Additionally, each will also drastically decrease an individual’s credit score. Some employers or organizations will listen to a consumer’s explanations or consider repayment of these debts. However, most simply cannot bend the rules to accept a score or report outside their established parameters.
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