By: David Haldi, President of CredHub
This article will discuss how reporting rental history to the credit bureaus can reduce rental income losses by reducing the number of evictions. First, let’s get real. Nobody really wants to evict a tenant, even if they’re troublesome. There is conflict about the monies owed. There could be extenuating circumstances that led to the resident falling behind. Maybe there are little ones involved. Evictions can get ugly and going through the process is a costly pain in the neck.
Let’s break down some of those costs…
Let’s say a tenant falls behind on a $1,000 per month unit. The lease dictates how long you have to wait to take action. Typically landlords provide tenants a 5-10 day grace period. After the grace period you will likely mail or post a notice at their door. Hopefully, they pay. But sometimes they don’t. Maybe they can’t if something unexpected has come up such as a job change, big medical expense, etc. So you give them some time. Maybe they’ve been good tenants until now. They promise to pay as soon as they can. And before you know it, the first month has come and gone.
Now things get serious.
You reluctantly go through the steps to have them evicted. It doesn’t happen overnight. Maybe they move out on their own, maybe they don’t. Either way, by the time you can clean and re-rent the apartment, you’ve likely lost three months’ rent or $3,000
These are some of the expenses you may encounter:
|Lost Rent – 3 Months||$3,000|
|Legal Fees and Court Costs||$500 to $1,000|
|Process Server||$50 to $100|
|Cleaning and repairs||$1,000 to $1,500
It doesn’t take much to see that this $1,000 a month apartment just ended up costing you $5,000 plus all the headaches that went along with this one eviction.
You can sue them for the money owed but the odds are, they won’t pay. You can take them to collections, but after the fees, you’ll be lucky to get half of it back.
So, how does something like rental payment reporting help you reduce those losses by reducing the number of evictions?
RentCred reports both positive and negative information monthly to the credit bureaus. This raises your residents’ awareness of their credit reports and credit scores. They see the value in making those payments on time, as their credit scores improve and they’re able to get better rates on car loans and credit cards. Payment reporting works like a carrot, rewarding residents for timely rent payments.
If they fall behind, they see it impacts their credit scores negatively. In the case of an eviction with money owed, RentCred reports that information as well. If you evict them, that negative information stays on their credit report for 7 years. Keep in mind as of June 2017 evictions are no longer reported on credit reports unless you use a third party (like RentCred) to place it on their credit report.
If they owe you money, the only way for them to clear it up from their report is to pay you in full. If they want to finance a car in the next seven years, or get a credit card or any kind of loan, guess what they’ll have to do? Contact you and work out a way to pay you back until the debt is satisfied. Anyone that looks at their credit report to make a lending decision will know that they owe you money due to an eviction.
How does that help you?
You are less likely to have to take a tenant to court if they feel the immediate consequences of not paying rent or getting evicted. You can sit back and know that their debt to you is following them around year after year. In our credit driven economy, they will likely be faced with being rejected while trying to finance a car or get a credit card. They will likely be rejected while applying for a loan or even trying to buy a house. And in those moments, they will feel compelled to reach out and make things right with you. And instead of splitting money with a collection agency when the tenant decides to pay you, the tenant can pay you directly.
So, if evictions are a problem you face reluctantly, know that the RentCred program by CredHub is a great way to help you reduce the number of evictions you have to deal with – and improve your chances to collect on otherwise hard to collect debt.
You can reference these previous articles related to rental reporting history for more information:
- Leveraging Rental Payment Reporting As A Marketing Tool
- Decrease delinquency to 3% or less by reporting rental payment history
To learn more about RentCred call (833) 888-CRED or email [email protected].