All kinds of big consumer purchases are reported to credit bureaus—car loans, credit cards, even furniture financing—but for many people, their largest and most consistent monthly expense simply doesn’t make the cut: rent.
Rent reporting services are transforming the property management landscape, creating a Triple Win of benefits for residents, property managers, and investors alike. These programs bridge a critical gap in the financial system by turning rent payments into a tool for building credit.
“It’s kind of crazy that someone’s largest monthly expense—their housing payment—is one of the only payments that isn’t on their credit report,” our Chief Customer Officer Andrew Smallwood said in a recent interview. “It’s a really significant payment on a monthly basis.”
Below, we’ll take a closer look at the concept of rent reporting and its benefits:
- For residents: Empowering financial growth through improved credit scores.
- For property managers: Enhancing tenant satisfaction while reducing administrative hassle for providers.
- For investors and owners: Increasing tenant stability and ensuring consistent cash flow.
Note: At Second Nature, we prefer the term “residents” over “tenants” to emphasize the relationship aspect of property management. However, legal contexts may still require “tenant” for clarity.
What exactly is rent reporting?
Rent reporting is the process of submitting rental payment data to credit bureaus (TransUnion, Equifax, and Experian) so that rent payment history becomes part of a resident’s credit history. This creates a built-in reward system providing additional incentives to pay rent on time, helping residents build credit and, in turn, access better financial opportunities.
For property managers, offering this service can streamline operations and enhance resident satisfaction by aligning their financial goals with reliable rent payments.
There are two primary ways rent reporting works:
- Property manager-led reporting: Property managers can use a rent reporting service to submit rental payments on behalf of their residents, ensuring accuracy and consistency.
- Resident-led reporting: Residents can sign up for a rent reporting service themselves, which tracks their payments and reports them directly to the credit bureaus.
Once payments are reported, they’re factored into the resident’s credit score. On-time payments reflect positively, potentially boosting their score. If missed or incomplete payments are reported, they may have a negative impact. Typically, a new tradeline appears on a resident’s credit report within 90 days of starting the service.
Rent reporting services: A Triple Win
Residents
Smallwood reflected that a member of the Second Nature team rents a home and gets credit building services through their Resident Benefits Package. This individual tracked the first 16 months of renting the property.
“What he saw was his score increased by 72 points over that time period, which, to put that in perspective, getting an increase of 20 to 40 points is likely going to move somebody up one to two tiers. A 70-point score is likely to boost somebody up probably two tiers, maybe even three, but what’s the impact of that? It makes life outside of rent much more affordable.”
Rent reporting services give residents a significant advantage by transforming what was once an unrecognized expense into a credit-building opportunity. In turn, an improved credit history can open doors to new financial opportunities, such as better loan and credit card eligibility, improved interest rates, and even greater accessibility to future housing.
For example, residents who report rent payments see an average 29% increase in their credit scores, which could mean the difference between qualifying for a mortgage, or securing lower interest rates from lenders on a car loan or credit card. This kind of improvement can also lead to significant annual savings on car payments, credit card interest, and future mortgage payments.
When it comes to cost, residents who self-report typically pay a small monthly fee for these services, while property managers offering the service as part of a benefits package often include it in their rent agreement. In either case, the investment is minimal compared to the financial benefits of improved credit.
Of course, it’s important to note that credit scores are influenced by multiple factors, and while rent reporting can be a powerful tool, it’s not a guaranteed fix-all—residents must also maintain good financial habits across all areas of their credit history to see meaningful, long-term improvements.
Smallwood reflected on the impact of rent reporting services, saying, “When you think about the median home price of $400,000 or more and the mortgage somebody would be taking on that to be qualifying at one to two tiers… [they benefit from a] lower interest rate because of [their] credit score. The impact of that is going to be tens of thousands, maybe even a hundred thousand dollars or more over the lifetime of somebody’s mortgage product.
“That’s a huge life-changing type of financial impact. It also means on their auto financing, that they’re going to be getting that at a lower rate. It also means their credit card, if there’s a balance, they're going to be paying a lower point of interest right on that credit card. It may mean the difference between even qualifying for a mortgage in the first place or qualifying for that auto loan that they need to get to work in the first place. And so, somebody’s credit score can really have a huge impact on their financial life, and experience as a resident getting the benefit of their largest monthly contribution towards building their score can make a huge difference.”
Property managers
Rent reporting services offer property managers a cost-effective solution to streamline operations, enhance tenant relationships, and reduce financial risk. In fact, a 2021 study from TransUnion found that 73% of renters would be more likely to make on-time payments if they knew their payment history was being reported to the bureaus.
- Positive reporting: On-time payments reported to credit bureaus can have a significant impact on residents building credit, incentivizing timely payments, and reducing the likelihood of delinquencies.
- Tenant screening: Rent reporting creates a transparent rental history and credit profile that future landlords can access, offering insights into a tenant’s payment behavior—both positive and negative.
- Marketability: Properties offering rent reporting attract tenants with financial goals aligned toward building good credit. These financially responsible tenants are also more likely to pay on time, reducing overall risk.
- Additional amenity: Including rent reporting as part of a benefits package positions property managers as forward-thinking and resident-focused, helping to retain existing tenants while drawing in new ones.
Rent reporting services can even create opportunities for ancillary revenue streams—depending on the program structure.
Investors and owners
For investors and property owners, rent reporting services provide an invaluable level of financial stability and predictability. By incentivizing on-time rent payments, these services reduce the likelihood of delinquency, ensuring a steady stream of income. Owners can rest easier knowing their tenants are more likely to stay in their homes longer, minimizing costly turnovers and vacancies.
Additionally, rent reporting aligns tenant interests with responsible financial behavior, which translates to fewer risks for property owners. Stable, long-term tenants not only protect the value of the investment property but also contribute to overall financial peace of mind.
Final thoughts
Rent reporting services can represent a transformative opportunity for residents, property managers, and investors. By integrating rent payments into credit reporting, these services empower residents to build better credit, provide property managers with streamlined tools to enhance tenant satisfaction and offer investors the stability of longer-term, financially responsible tenants.
Interested in exploring what these services can do for your residents? Second Nature’s Resident Benefits Package makes implementing rent reporting effortless. With features like credit reporting to all three major credit bureaus, 24 months of back-reporting on past payments, and an automated, fully managed process, Second Nature ensures you can maximize the value of your property management strategy while creating meaningful benefits for residents.
To learn more about how rent reporting and the entire RBP can create a Triple Win for your company, join our upcoming RBP Workshop.
December 16, 2024
