At some point, almost every landlord encounters a bad tenant who doesn’t pay rent on time or owes money for a damaged apartment. While these situations may prompt you to take to a punching bag, this isn’t always the best course of action. Instead, consider reporting them to the credit bureaus. There are plenty of reasons to report your client to all three credit bureaus, and this article will help you understand the benefits of taking this extra important step.
Costs and Benefits
It’s true that it costs money to report to each credit bureau (Experian, TransUnion and Equifax) and that landlords and property managers need to register with each credit bureau’s subscription service separately. It’s also the case that reporting a tenant is not necessarily going to get you any money that’s owed to you, which is one of the main concerns of any property owner in this unfortunate situation. However, the cost is well worth it. Reporting your tenant to each bureau means that the full credit history becomes available to everyone who runs a check on him or her, which is an important step in building a comprehensive record of your tenant’s late or missing payments.
Help Out the Landlord Community
There are other broader reasons to report a client to all three bureaus. Remember that you belong to a community of property owners who may also suffer from tenants who don’t pay their rent on time. Reporting a bad tenant to all three credit bureaus helps create a picture of that tenant as fiscally unreliable, and may save other property managers like yourself time and money. When all landlords follow this practice, it helps protect everyone from what could be a bad or unreliable tenant. It also punishes tenants who have failed to pay in the past, which is one of the main purposes of filing a negative credit report in the first place.
Creating Incentives For Tenants
Inform tenants that if they pay their rent on time, it will be reflected in positive credit reports, and consequently, ensure they understand that when they fail to pay on time, there are real consequences.
Property owners can also mention in the lease that they won’t hesitate to report fiscally irresponsible tenants to all three credit bureaus, which can universally harm their credit scores. This offers tenants an additional incentive to make payments on time.
Alternative to Reporting to the Credit Bureaus
Some landlords may not report directly to credit bureaus and instead opt for collection agencies to take that step for them. While taking these actions may help you collect the money you are owed, it’s important to ensure the collections agency reports the tenant to the three bureaus, or that you take this additional step yourself.
Just remember, the Fair Credit Reporting Act requires a tenant to be notified within five days from the point the negative report was filed. This could also spur the tenant to pay the costs more promptly that are owed to you as the landlord.
While nobody likes having to deal with a difficult tenant, landlords and property managers need to use the tools that are available to them to fight back. Reporting to all three credit bureaus is one of these important tools that reinforces penalties and serves the entire landlord community.
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