Rent reporting: A leading amenity differentiator
In today’s economy, establishing and building a good credit score is crucial for financial health and wellbeing. Historically, credit scores have been influenced primarily by factors like credit card usage, loan repayments, and other similar forms of credit. However, a growing trend in the credit industry is the inclusion of rent payments in credit reports. This change can significantly impact renters who are looking to build or improve their credit scores.
By Zach Hardison, product leader at Foxen®
This content has been contributed by IREM Sponsor Foxen®.
What is rent reporting?
Rent reporting is the process by which a resident’s monthly rent payments are reported to the leading credit bureaus. Unlike mortgage payments, which are typically included in credit reports, rent payments have not always been considered. With rent reporting, rent payments can be reflected in a resident’s credit report, potentially boosting their credit score.
How does It work?
- Property setup: To have residents’ rent payments reported, you must set up and implement a rent reporting service. There are a variety of factors to consider when choosing which service will meet the needs of your business, including ease of connectivity, resident costs, potential ancillary income opportunities, and customer service and support.
- Resident verification: Once a resident is enrolled in the program, their rent payment is matched to the correct credit profile. Verification ensures that the information reported is accurate and reflects the resident’s payment behavior.
- Monthly reporting: Each month, rent payments are reported to one or more of the major credit bureaus, Experian®, Equifax™, and TransUnion™. The credit bureaus rent payments are reported to is dependent upon the program you choose, and varies by company. Including these payments in a credit report helps establish a consistent payment history; a significant factor in credit scoring.
- Credit score impact: On-time rent payments can positively impact a resident’s score, encouraging rent collection and efficiency. Late rent payments can also be reported, negatively impacting a resident’s score. Both positive and negative reporting give credit bureaus a complete picture of financial responsibility - a key factor in credit scoring models.
Reporting positive and negative rent payments
One item to consider in the rent reporting space is accounting for both on-time and late rent payments, commonly referred to as positive and negative reporting, respectively. Reporting both to credit bureaus offers a holistic approach to credit building and tenant accountability. This comprehensive reporting provides a full picture of a tenant’s payment behavior, benefiting both residents and properties in a variety of ways.
- Comprehensive credit profiles: Residents with responsible payment habits can showcase a well-rounded credit history, enhancing their financial credibility. For renters with little to no credit history, this is an excellent way to build a positive credit profile.
- Market differentiation: Properties that offer rent reporting can attract residents eager to improve or build their credit, setting these properties apart in a competitive rental market.
- Rent collection: Rent reporting incentivizes on-time rent payments from residents eager to see the benefits, creating a more reliable and efficient collection process.
- Improved financial education: Residents become more aware of how their payment behaviors impact their credit scores, leading to better financial management practices. Additionally, higher credit scores create more opportunities for better credit card offers, loans, and even lower insurance premiums.
Rent reporting creates a more responsible and stable rental market by encouraging residents to make on-time payments. Residents are empowered and encouraged to build their credit and access financial opportunities while providing properties with reliable residents and stable rental income. As this practice gains traction, the rental market stands to benefit from increased transparency, accountability, and financial health for all parties involved.
Evaluating rent reporting services
If you’re considering offering your residents a rent reporting service, there are a number of factors to take into account to identify the right partner for both your property and your residents.
- Service fees: Depending on the rent reporting service, there may be implementation or ongoing operational fees. It’s essential to weigh the amenity benefits against the costs.
- Resident support: When evaluating rent reporting services, consider who’s primarily responsible for receiving resident questions or disputes and how they’re handled to ensure elevated levels of service and support.
- Operational lift: Depending on the service provider you choose for rent reporting, there can be little to no operational effort on the part of the property, from marketing and communications to ongoing program maintenance and oversight.
In conclusion
Rent reporting to credit bureaus is a powerful tool for renters looking to establish or improve their credit scores, and is becoming a common and popular amenity sought out by residents. However, it’s important to consider all factors when choosing the right program. Has your property considered implementing a rent reporting program? What challenges have you faced in the past when choosing a service? For more information on Foxen’s rent reporting program, Rentistry™, please visit our website to learn more.
About the author
Zach Hardison is a product leader at Foxen®, a real estate technology company dedicated to creating products and solutions that benefit both properties and their residents.
At Foxen, Zach has led comprehensive strategic initiatives to streamline product operations, grow and expand revenue opportunities, and create a best-in-class product experience for clients and customers.
Zach brings over 15 years of experience in product management, innovation as a discipline, and UX/CX strategy, developing industry-leading products in fintech, healthtech, and high-growth organizations.