According to a recent study by TransUnion, renters in their 20s and 30s want their landlords to report rent payments to the major credit bureaus. The main reason: Gen Z renters wish to build their credit health faster.
Rent reporting has a positive impact on the industry in general. There are plenty of benefits to landlords—not just tenants—of reporting rent to TransUnion, Experian, or Equifax. For example, landlords who report rent payments to credit reporting agencies find that tenants are more likely to pay rent on time. It also improves transparency in the rental industry, especially when you interview prospective tenants.
Survey Shows Gen Z Tenants Want Rent Reported
According to the TransUnion study published in April 2022, 27% of property managers aware of rental credit reporting were doing it.
In total, the survey included responses from 350 rental property managers and 2,039 tenants regarding including rental payment history in the credit report.
Here are some interesting facts and figures:
- 72% of landlords say rent payment reporting is straightforward.
- Two-thirds of the landlords who do not report rent to credit bureaus state that it’s not easy to do.
- 70% of respondents said they would consider reporting rent if it meant fewer late rent payments, fewer defaults, and a lower risk of eviction.
- Nearly 50% of landlords said that rent reporting attracts more financially responsible tenants.
Why do Gen Z tenants want rent reported to credit bureaus? Here are some interesting insights from the survey:
- Only 15% of tenants, in total, have their rent payments reported.
- Nearly 30% of Gen Z renters have their rent payments reported.
- 60% of those under the age of 30 are interested in reporting rent.
- 70% of renters who have had their rent payments reported saw their credit score increase significantly.
- 77% of renters said they would be more likely to make rent payments on time, knowing how it could impact their credit history.
According to Maitri Johnson of TransUnion, the rent reporting is a win-win for renters and rental property managers.
“With a strong push from Gen Z renters, who make up a significant portion of the renter base today, we’ll likely see reporting become an industry standard—and as a result, a critical mass of renters who can elevate their standards of living through greater access to credit.”
“Ultimately, rent payment reporting is helping more people gain access to credit that can positively change their lives,” Johnson states. “Greater financial inclusion is good for the industry and good for consumers, and I’m excited to see it gain traction.”
So, if you’re a landlord or rental property owner, there are many reasons to consider reporting rent. One reason is that rent reporting is relatively rare—73% of landlords don’t do it. This means you can set yourself apart from the competition.
Find financial freedom through rentals
If you’re considering using rental properties to build wealth, this book is a must-read. With nearly 400 pages of in-depth advice for building wealth through rental properties, The Book on Rental Property Investing imparts the practical and exciting strategies that investors use to build cash flow and wealth.
How to Report Rent Payments to Credit Bureaus
Tenants can’t report rent payments to credit bureaus themselves. Therefore, landlords can report rent using a property management app, or tenants can use a third-party rent reporting service. For example, landlords can report payment information directly to TransUnion.
There are several independent platforms for tenants, including Rent Reporters, CreditBoost, Level Credit, or Rental Kharma. Most of these services have a one-time fee to enroll. However, landlords will need to verify the payment.
Another way tenants can ensure rent payments count toward their credit score is by using a credit card. Then, each month they can make a credit card payment to their landlord.
Does Not Paying Rent Affect Credit Score?
Tenants realize that missing a monthly rent payment will affect their average credit score, like being late with any other bill. However, some rent reporting platforms only report on-time rent payments. Therefore, a tenant’s credit score may not take a hit if they pay rent late.
Reasons for Landlords to Report Rent Payments to a Credit Bureau
Most renters are interested in rent payment reporting, making it a compelling reason to offer this service. In addition, rent reporting helps prevent late or missed rental payments. Therefore, landlords can improve their quality of service by including rent reporting in the rental agreements.
Collect rent from tenants on time
The most noteworthy benefit of rent reporting for landlords is on-time payments. Collecting rent is the most significant pain point for landlords. So, anything that can encourage on-time payments is something positive.
Studies have shown that seven in ten renters would make on-time payments if their property manager reported rent. Data released by TransUnion show that this figure increases to eight in ten for Gen Z renters. This means you attract more reliable renters and reduce the risk of having to evict a tenant.
Fill vacancies faster
Offering rent reporting as a service in the rental process sets you apart from the competition. For example, suppose there are two identical apartments, but one landlord offers rent reporting to the three credit bureaus. In that case, it’s a no-brainer for the tenant to decide on which apartment to rent.
According to some reports, 70% of rental applicants would choose the apartment that offers rental payment reporting over an identical one with the service. Therefore, rent reporting can mean happier tenants and fewer vacancies.
Rent reporting encourages tenants to pay rent online
Providing rental payment reporting is one of the best ways to get tenants to pay rent online. Of course, the easiest way to do this is to use a dedicated rental payment app that incorporates rent reporting. But using an app for rent payments has more advantages. For example, tenants can set up recurring payments, and landlords can block a partial payment.
Even though tenants can use digital payment apps like PayPal, Zelle, and Venmo to pay rent online, these platforms have significant disadvantages. First and foremost is that there is no way to report rent. So, if you are using a digital wallet for rent collection, it may be best to consider an alternative.
Tenants can boost their credit score
Many tenants love the idea of reporting rent payments to credit bureaus. After all, monthly rent is likely one of your tenants’ largest recurring expenses. So, just how much can rent reports improve credit history?
According to Yahoo! Money, factoring rent payments into a credit report could shoot up a score by 60 points. This could mean that a tenant could go from being a lending risk with poor credit to a near-prime score in no time—and without changing spending or lending habits.
A high credit score means your tenants have more leverage—therefore, it’s easier to pay rent. For example, Multi-Housing News says renters with a high credit rating could pay around 10% less for financing. In addition, they can secure better terms for interest rates on credit cards.
Gen Z renters will keep the trend going and demand that landlords report rent to credit reporting agencies. So offering rent reporting not only makes excellent business sense. But it’s a great way to improve landlord-tenant relationships and make the rental process as simple as possible.