The profitability of rental property often comes down to one thing: the quality of your tenants. If you have good tenants, they will pay their rent payments on time and will typically take care of their apartments. Bad tenants, on the other hand, can cause a myriad of problems for property managers. Because it can be hard to select the right tenants, many property management firms are now beginning to utilize landlord credit bureau services. Here are some important things to know about this if you are interested in boosting the profitability of your rental properties.
What Is A Landlord Credit Bureau?
Credit bureaus are agencies that track credit, and they do this by receiving reports and updates from creditors. These bureaus only post the information they receive, and this can be from credit card companies, banks, collection agencies, and bankruptcy courts. In addition, they are now starting to receive reports from landlords and property management companies.
Landlords are now encouraged to report rental payment history of all tenants. To do this, a landlord must register with each credit bureau, which may involve paying fees. Once a landlord registers, he or she will have the ability to post updates and information about the tenants he or she rents to.
What Benefit Does This Offer Landlords?
Until now, landlords really have had no good way to find out the rental history about potential applicants. Landlords can perform background checks and make phone calls to the references potential applicants list, but they have never truly been able to find out the rental history of a person.
By using credit bureau information as part of the screening process, landlords now have a way to find out a person's rental history. While there is currently only a small percentage of landlords using this system for this purpose, the numbers are expected to increase over time. At some point, the majority of landlords may use this system regularly.
Not only does this offer a way to post the history of a person's rental payments, but landlords can also use this to report:
- Bad checks received from tenants
- Eviction information
- Judgements for money owed by tenants that moved out or that were evicted
If you are a landlord and look up an applicant's credit report and find any of these things, you would have the ability to reject the person's application. The main benefit of this is that landlords might be able to avoid renting to people that do not have good rental payment histories. If you are a landlord and could find this out ahead of time, it could save you a lot of trouble in the future.
What Benefit Does This Offer Renters?
Renters can also benefit from this system, because it could help them improve their credit scores. If a person is renting an apartment and wants to build his or her credit, the act of the landlord submitting monthly updates to the credit bureaus could help this person achieve this. Consistent on-time payments is one of the best ways to build credit history, because it shows responsibility.
Tenants that pay their rent on time would probably be happy to find out their landlords were using credit reporting, because it would only help their credit scores. These are the kinds of tenants you will hope to find for your rental properties, because tenants that pay their rent are typically good tenants to have.
If you are trying to find a way to locate better tenants for your rental properties, this is one type of tenant service you might want to consider using. You can learn more about this by contacting a company that offers tenants services in your area, such as Two Rivers Investment.