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Reporting Good Information to the Credit Bureaus
Do you want to improve your tenant’s credit rating? Even though the major credit bureaus require a large number of accounts per reporting individual, there are still ways to help improve your tenant"s chances of obtaining financing.
Report the Bad
Many people contact The LPA because we have a way to report onto the tenant’s credit report. According to the Major Credit Bureaus, such as Experian, TransUnion, and Equifax we are able to report delinquencies, collection and bad debt onto a tenant’s credit report through an authorized agent. This type of reporting is offered and explained in more detail on our webpage called Report Tenants to Credit Bureaus
Popular Misconception
I'd like to clear up one of the common misunderstanding regarding positive reporting on tenants. There are some websites that offer monthly reporting for positive and negative information on your tenants credit reports, that I think are fine if your tenant is behind in the rent. Those are called collection accounts. The misunderstanding is that this will help your tenant improve his credit. They allow you to report "on time" & current rent payments, which is meant to be positive for your tenant, but it may actually be detrimental to his credit report. Why is this? Because these accounts collection accounts and may show up on the credit report as "in collection".
Report the Good
How can you improve your tenant's credit?
I wouldn't do it, but, one creative method around the 500 account minimum required by the major credit bureaus was brought to my attention.
The tenant would need a landlord who is committed to helping improve the tenant’s credit. (In my opinion, this landlord is either a relative or totally committed to building the tenant's credit. Perhaps if the tenant is buying the property.) This method involves the landlord calling his own credit card company or applying for a new line of credit in his own name, while making the tenant nothing more than an authorized user. I know it made me uncomfortable to think I’d be sharing any accounts with any tenants, but then I was told that the primary cardholder has full control of the account. Obviously, I don't recommend doing this especially if you don’t fully trust your tenant, but it can be safely done by keeping the account safely out of the tenants hands and protected by the landlord’s password.
Once an account like this has the tenant's name as an authorized user, that account's payment history will also be listed on the tenant's credit report as a current, never late (hopefully) account. The landlord can then remove the tenant's name as an authorized user at a later time.
Another positive factor that can improve your tenant's chances at obtaining a mortgage is quite simply a positive referral letter that commends the tenant for a perfect payment history for the length of the tenancy. This is a popular item required by many lenders who want to verify the borrower's past rent payment history. Besides, lenders don't expect to see rent listed as a debt on the credit report.
It is our hope to soon be able to provide a service for positive reporting to the credit bureaus that won't require a minimum number of accounts. But until the major credit bureaus will accommodate landlords in this area, tenants will have to play more of a role in improving their own credit.
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