How To Report Bad Tenants To Credit Bureaus
Unreliable, destructive tenants are a massive thorn in the side of many landlords. In some of the worst cases, you end up having to chase down former tenants for rent that is past due, or payment for damages to your property. In these moments, it is frustrating and upsetting to think that their rental history had no indications of such costly and problematic issues.
While property management can typically be considered a sort of competition between landlords, there are actually quite a few ways that landlords can and do help each other to succeed. One way that landlords can make other landlord lives easier is to report their bad tenants to a national credit bureau, such as TransUnion, EquiFax, or Experian.
But how do you go about reporting bad tenants? Can you do this by simply filling out a form online, or by mailing in some documents? Unfortunately, it’s not that quick nor that simple. However, if it is important to you that you report serious issues with a tenant, then it is possible to ensure that bad tenants have to carry that reputation with them.
Today, we’ll discuss the main ways you can report terrible tenants and why it is important that you do so.
Why It’s Important To Report
If you’ve managed to get rid of a problem tenant, you might not immediately be thinking about reporting them to the big three credit bureaus. After all, you have finally washed your hands of them and can proceed with finding more suitable tenants. Even if you lost money, why would you want to spend more of your precious time dealing with the problematic former tenants again?
Ultimately, the main reason that you would want to report bad tenants to credit bureaus is to ensure that they are not able to easily cause the same distress to another landlord without due warning.
While it is true that you might be able to get the money that you are owed by hiring a collection agency or informing the tenant that you’re going to be reporting them, it is difficult to get results in most cases. The responsibility of doing this lies in the fact that irresponsible tenants can be followed by their poor behavior due to your report.
Method #1: Multi-Property Landlords
This first method is for landlords who are managing and accepting payments on a lot of rental properties. The specific requirements of how many properties or payments must be accepted on a regular basis varies from one credit bureau to another, but TransUnion requires at least 100 subscription accounts before you can report bad tenant behavior.
For most of the credit bureaus, regularly reporting when rent payments are made is the only way to ensure that your reporting is taken seriously when payments are not made. If you have been reporting irregularly, you will need to provide more detailed information about what exactly is owed to you and why. To report in either of these cases, you’ll need to subscribe to their service.
Your Subscription Profile & Reporting
Regardless of which bureau you want to report to or which method of reporting you are using, you will need to set up an account with the bureau in question in order to regularly report payment history from your tenants.
To do this, you can visit the website of any of the bureaus that include rental payments in their credit score directly: Experian, Equifax, and TransUnion.
Once you have an account, try to get into the habit of rent reporting regularly, or use their recommended rent payment services to have everything automatically reported whenever a tenant makes their payment through the service. This method is becoming more and more common, and it can have big benefits for both you and the tenant.
For you, you’ll be happy knowing that the tenant’s payments are secure and on-time. Additionally, you know that the tenant is more likely to pay on time so that their credit score is not affected by late payments.
For the tenant, they have the bonus of knowing that paying on time can help to improve their credit score and help them to buy a house or get a car loan in the future.
Method #2: Smaller Scale Landlords
If you have less than 500 units that you are dealing with, you can use Experian’s RentBureau service in order to manage your rental payments and ensure that those payments are being recorded into the tenant’s history.
When both you and your tenant agree to use this service, rental payments will be transferred from the tenant’s bank account to yours on a regular basis. All payment history, both good and bad, is then reported to Experian.
Of course, there are limitations even with this type of service. While late and missed payments will be reported, things like rental property damage and evictions will not be fully reported to the credit bureau in question.
Method #3: Civil Judgments
After you complete an eviction or a tenant leaves without paying rent that they owe you, you can sue the tenant in a civil court case for the money that they owe you. Even after evicting a tenant, this is often the only way that you can collect the money that you are owed.
If you win the case, this civil judgment will become public record, and the record will eventually trickle down to the credit bureaus within a few months. A monetary judgment decided in civil court can take as much as 100 points off of the tenant’s credit score, and the report will remain on their account for seven years.
The next Landlord that comes across a tenant that has this severe judgment on their credit report is likely to think very carefully before they rent to them.
Method #4: Collection Agencies
For most small to mid-scale landlords or property managers, the previous three methods might not be the easiest to accomplish. After all, you have a limited number of resources, and we understand that.
In cases where you cannot afford the time nor expenses to take on a new court case or pay for a credit reporting subscription program, you can outsource the debt that a previous tenant owes you to a collection agency instead.
When you bring on a collection agency, you are hiring them to chase down late rental payments as well as any other eviction or damage-related debt that a tenant might owe you. If a tenant won’t pay up, the collection agency can then report this to the three major credit bureaus.
Collection agency filings result in a serious negative hit to the tenant’s credit score, and future landlords are sure to be wary of this black mark on their record in the future.
Your Responsibilities When Reporting
No matter which route you take to ensure that any bad tenants that you deal with are reported for their problematic behavior, you will want to take these important precautions.
Always make sure that you have physical and undeniable proof that your tenant owes you the payments or debt that you are reporting.
Tenants must be notified within 30 days of you submitting a report about their payments, whether that report is positive or negative.
If tenants don’t agree to make rental payments via a subscription service that records and reports this rental history, you will not be able to report their payments that way.
Make sure that you update the credit bureaus as necessary when the tenant’s debts are paid off. If you hire a collection agency to handle the debt, they will be responsible for this step.
Keep in mind that reporting payments may cost a small fee. If your tenant is amenable, you can split this cost with them. If they agree to their payments being reported but don’t find it to be a requirement, you may need to foot the bill entirely.
Credit Reporting: Your Choice To Make
Whether or not you want to go through the process of reporting bad tenants to national credit database providers, you should keep it in mind as an option in case you ever need it. If you came across a tenant with a seemingly clean payment history only to find out later that they had been frequently late with payments in the past, wouldn’t you have wanted their former landlord to report this?
Checking credit score and credit reports can be a big part of tenant selection; help other landlords ensure that they are not trusting the wrong tenants by reporting bad behavior (and good behavior!) as regularly as possible.
Using a subscription service that reports all payments – good or bad – can be a good way to entice tenants to want to enroll in such a program. It can help to raise their credit score if they pay on time – and it can give you peace of mind, too.