Landlords are beginning to report on-time rental payments to credit reporting agencies.    RentBureau, part of Experian,concentrates on the multi-family rental industry and collects negative, as well as, positive rental payment histories on tenants.

"Rent Bureau now has a program that allows participating property management companies to feed rent payment histories directly to the bureau. The information will supposedly make its way to credit reports and FICO scores." says Janet Portman, columnist for Inman News.

Their website states that this will be good for tenants looking to rebuild their credit to qualify for future home buying.  In the past, only negative information was gathered, such as evictions or collections, so this allows positive information to influence your score.

Property Management companies will be able to access information so that "the people who screen applicants will reduce the risk that they will admit tenants who will later skip out, require an eviction, and cause bad debt write-offs. " says Portman.

Collection Agencies will also be using this tool to get up to date contact information on debtors to collect past debts.

Is this good for tenants?  "First, keep in mind that tenants in practically every state have remedies when their landlords fail to make necessary repairs or to keep premises fit and habitable: They can withhold rent, or repair and deduct the cost from that month's rent." says Portman. "Each remedy results in less or no rent being paid -- and this appears to be what will be reported, immediately, regardless of the legitimacy (or not) of the tenant's use of the remedy."

Portman wonders if this will make tenants hesitant about exercising this right against the landlord?  If the landlord reports that full payment was not made, will the tenant be able to get this taken off their report?

"A second issue with this system is that it will not reach the many tenants who do not rent from large landlords or owners using property management companies." says Portman.

"These tenants, many of whom are on-time payers, may not enjoy the benefit of having their rental history boost their credit reports or FICO scores. And conversely, renters from small or mom and pop landlords who are frequently late or skip will fly under the radar and get a credit report and score that has missed their bad behavior, thereby misleading those (including landlords) who rely on the report or score."

This system will be good for tenants who always pay on time, rent from larger companies who are good landlords and for those who need to build their credit rating.

Read the full column at Inman news.

photo credit: paul.derry

Posted in GenX GenY, Real Estate Trends

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