There are many benefits to reporting your residents’ positive rent payment data to credit bureaus. Not only does it provide an opportunity for residents to build their score with each rent payment, it also benefits you and your staff by encouraging on-time rent payments, as well as attracting and retaining residents who care about their credit. Healthy credit unlocks many doors in life, including opportunities to qualify for auto financing, get better interest rates, refinance debt, and more. With a strong credit score, your residents will be able to save money and build a stronger financial future.
But before you begin reporting data to credit bureaus, there are a few important responsibilities and considerations you should be aware of. Rent reporting is a highly specialized and regulated field. To make sure that your residents and your staff enjoy the benefits of rent reporting, without creating additional work, you’ll want to carefully consider your approach. Instead of a logistical nightmare, rent reporting can and should be a seamless process that provides a competitive leasing incentive for your property.
Reporting to All Three Credit Bureaus
In the U.S., there are 3 national credit bureaus (Equifax, Experian, and TransUnion) that compete to capture, update and store credit histories on consumers. Lenders refer to the credit reports these bureaus generate to determine creditworthiness when consumers apply for a loan, mortgage, new bank account, lease, or new credit card. Although some institutions make decisions based on the information contained in all three bureaus’ reports, not all do — and many lenders will only pull a consumer’s report from one bureau.
The credit bureau used to make lending decisions or perform residential credit screenings varies by lender, industry, and region. This means that if you do not report rent to to all three bureaus, it will result in an inconsistent credit history. This can impact your resident negatively if they are denied credit or given less than favorable loan terms because their rental tradeline does not appear on the credit report pulled by the lender. If consumers expect to get credit for their rent, but it only shows up on their tradeline at one bureau, you will deal with more disputes — which will be your responsibility to respond to if you are the data furnisher, which brings us to the next responsibility:
Becoming a Data Furnisher
Not just anyone can report rent payments to credit bureaus. In order to report credit information, a company must become a certified data furnisher. This is a separate process for each bureau — which means it is possible to be a furnisher to one bureau, but not the other two. (This is the main reason why rent is not always reported to all three bureaus.) To become a data furnisher, you must follow a set of very strict provisions for each bureau. This involves an extensive application process for each one, which involves a showing that you are equipped to consistently report accurate consumer data and submit that data in a very particular format called Metro 2 (which typically requires purchasing a specialized software to create these data files). In addition, data furnishers must submit to a physical inspection of their location of business by each bureau they wish to become certified with, and pay an inspection fee.
Image Source: Equifax - Guidebook for Prospective Data Furnishers
Becoming a data furnisher is a complex process, especially to report data to all three bureaus. If you’re feeling overwhelmed at this, the good news is, you don’t have to be a data furnisher to offer your residents rent reporting.
Instead, the best option for almost all property management companies is to work with an established data furnisher who will report consumer payment data to all three bureaus on your behalf. At RentTrack, we were the first rent reporting service to become a data furnisher at all three bureaus, and we always report every payment to all three. No matter which rent reporting company you choose to partner with, be sure to get clarity on whether or not they assume the responsibility of a data furnisher. If they do not, then your business must be prepared to meet these requirements.
Security and Identity Theft Prevention
Gathering the records necessary to report your residents’ rent payments to credit bureaus can risk exposing their sensitive personal information to identity theft if you are not careful. Just as you must protect residents’ sensitive data (such as their social security number) when you collect it for credit screening purposes, you must do the same if you are acting as a the data furnisher to report rent payment data. For example, you cannot store files with sensitive consumer information on unsecured employee laptops.
This is another reason to work with an established data furnisher who will act on your behalf to report information the right way, and keep it safe.
You should also consider including Credit Protection for your residents when they enroll for rent reporting. Credit Protection sends them an instant alert about any important changes on their credit report — so if someone uses their data to open a new account or commit fraud, they can prevent losses or recover them quickly.
Compliance with the Fair Credit Reporting Act
Consumers are protected from inaccurate, unverifiable, and out of date reports by the Fair Credit Reporting Act. If you choose to become a data furnisher, someone on your staff (or multiple team members) should become FCRA certified by the CDIA to reduce your liability. There are many rules and requirements you must follow as a data furnisher in order to avoid violating the Fair Credit Reporting Act, so getting certified protects your business. If you don’t want to take on this liability, you should instead work with a rent reporting company who acts as the data furnisher for your residents’ rent payment data, and be sure that they are FCRA Certified.
Finally, when you report residents’ rent payments to credit bureaus as a data furnisher, you are required to handle all disputes from consumers. This involves thoroughly investigating the records in dispute and notifying bureaus about the dispute and the outcome. For handling disputes, you’ll need to have a toll-free number that consumers may call to initiate a dispute and get support, as well as the ability to provide a free copy of the report you furnished with their data to each bureau.
At this point, you won’t be surprised that the best way to sidestep this burden is to work with a data furnisher who will assume the responsibility of investigating and reporting these disputes so you don’t have to. Make sure and ask any rent reporting company you consider working with about their customer support — be sure that residents will have a dedicated contact number to call if they need to dispute any information. Your staff also may not have the time to provide accurate, in-depth answers to residents’ questions about credit building and reporting, so you should be certain that your rent reporting partner is set up to field all of your residents’ questions.
Although the above considerations are important to think through before you begin rent reporting, don’t let them intimidate you — rent reporting is well worth it for both you and your residents. Healthy credit makes a big difference for your residents, which gives you a boost when it comes to marketing your property, collecting rent on time, and retaining residents. By partnering with a company who can navigate these requirements for you, the process of offering reporting to residents becomes simple.
Author Bio: About RentTrack As a pioneer in the rent reporting industry, RentTrack was the first rent reporting agency to build relationships with all three major credit bureaus. RentTrack is paving the way to make rent reporting the norm on every tenant's credit history—empowering them to make their financial goals a reality.
In addition, RentTrack has partnered directly with top property management software providers to offer seamless integrations. RentTrack believes strongly in protecting customers' data, demonstrating a commitment to rigorous compliance, as well as industry-leading security measures.
If you liked this article, subscribe to Rentometer's email newsletter to stay up-to-date on the latest trends in rental housing.