There are over 111 million renters in the U.S. today and for a large percentage of them, paying rent is one of the biggest financial obligations they have each month. While credit card payments are frequently reported to credit bureaus, not everyone’s rent payments are reported.
Today this creates a missed opportunity for renters and property managers alike.
For consumers with limited credit history, this type of reporting often can help them establish a credit score by providing on time rental payment history for their apartments and rental homes. For property managers, rent payment reporting means they can expand their amenity offerings while also helping to reduce delinquency risk.
Large property managers and even small independent landlords can implement a rent payment reporting program and leverage its benefits. The ability to provide a program that gives back to the resident by helping them build and establish their credit is increasingly valuable.
Rent payment reporting can help millions of renters build their personal credit history and proactively and positively impact their credit scores by consistently paying on time, which, in turn, potentially can lead to new opportunities for favorable financial products and loans.
For multifamily owners and operators, the program reaps significant rewards. By providing rent payment reporting to residents, it creates a motivation for renters to make on-time payments, potentially resulting in improved cash flow.
A case in point: Equity Residential
National multihousing powerhouse Equity Residential owns and operates nearly 80,000 apartment units throughout cities such as Boston, New York, Washington, D.C., Seattle, San Francisco, Los Angeles and Denver.
Equity Residential’s Chris Jenkins, Vice President of Business Planning, sees the trend as a new way to improve the resident experience journey. Customers are first made aware of rent payment reporting as an additional service at the start of the lease contract. Once customers complete the application process, rent payments are officially added to the resident’s credit report each month—which can help residents begin to establish their credit history.
As property managers continue the relationship with their residents, it is in their best interest to ensure they know the ins and outs of rent payment reporting.
How does payment reporting begin?
Equity Residential is an early adopter of rent payment reporting in the property management industry.
The primary driver for adopting this feature was providing customers with the capability to benefit from all of their on-time payments, and to naturally motivate them to stay the course.
Equity Residential found that 65-70 percent of residents are already monitoring their credit, so they are aware and knowledgeable about credit scores and status. They are happy to be getting “extra credit” for paying their rent and view the rental payment reporting as a positive experience.
For underbanked consumers, the reporting program helps them establish a credit file and contributes toward building their score. For those who pay on time, this can make a positive difference on getting approved for additional credit products. For example, if a resident is looking to buy a car a year or so down the road, credit for these on time rental payments potentially can help them get approved for financing.
In fact, residents with low credit scores saw an improvement of up to 50 basis points in their credit score based on on-time payments being reported. Residents who get credit for paying their rent today are also working toward building a more secure financial future for tomorrow. Equity Residential has found that reporting in a manner very similar to any other financial transaction results in having a tradeline on a standard credit report, which is the most meaningful way to achieve the desired results.
Equity Residential started working with TransUnion by implementing the program with new leases and renewals. They also built out a process for managing disputes, which aligned naturally with existing processes established in the collections group.
When to report
Reporting is automated through Equity Residential’s proprietary property management software. Daily reporting enables the organization to make corrections more quickly, in as little as 24 hours, but the typical scenario for most owners is monthly reporting. For Equity Residential, rent payment reporting is now integrated into its leasing and move-in processes.
Property management companies are catching on to the rent payment reporting trend as it helps stabilize their business and creates better customer relationships. It also offers consumers the capability to build and establish their credit when monthly rent payments are made on time and consistently.
The potential benefits from this hidden amenity can also help residents down the road as those with established on-time payments may potentially obtain lower interest rates, are qualified for more credit products or have access to increased amounts of dollars for personal loans or revolving credit lines.
Author Maitri Johnson, Vice President of Multifamily at TransUnion