A New Credit Tool for Residential Landlords.

rent due

Now California residential landlords have a new tool to improve tenant credit and reduce evictions.  Experian and Transunion have started adding rent payment data to credit profiles.  Landlords can use this information to discern dead beats from tenants more likely to pay their rent and on time. This tool comes at a time when evictions are taking longer and have become more expensive. California State cutbacks have significantly increased the time it takes landlords to get an eviction proceeding.  Tenants now have the right to demand  jury trials that can spiral costs.

At one time, credit companies reported filed eviction actions against tenants. Landlords refused to rent to tenants who had such evictions filed against them.  This service was a very effective method to discern good from bad tenants.  Tenant advocacy groups convinced legislators that this method was unfair since landlords could unjustly file evictions.  So now, the credit companies can only file evictions that go to judgement.  Bad tenants beat the system by moving out just before the eviction court date and thereby avoid a judgement on their record. Today it could take three to five months to get a court date.  The next landlord would never know that the tenant was in eviction because without a judgement, a tenant’s credit score is not impacted.

With the new service,  Landlords may be able to discern such deadbeats from  rent payment histories.  Further, tenants will have a powerful incentive to pay their rent on time because if they don’t, their non payment or late payment will be reported on their credit and will impact their credit.

The catch for landlords is that  to use the service, landlords need to sign up with an online payment service like Rent Track and pay $1.95 per month per tenant.  Rent Track is an automatic online bank payment service.   Rent Track alerts you the moment tenants have paid. Funds deposit within 24-72 hours. However, the tenant needs to opt in to rent payment reporting

However, if the landlord turns uncollected rent over to collection agencies, the collection agencies can report the uncollected rent to the credit companies. Once the collection appears on a credit history, it will stay there for seven years and drop a credit score.

Unfortunately, such collection information is not routinely reported.  The online payment services may change this practice.  You may read  more in the Los Angeles Times article below .

 

Experian, TransUnion start adding rent payment data to credit profiles – LA Times.

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