16 Mar Helping Renters Build Credit
I’ve been a tenant. I paid my rent on time every month. When I finally decided to purchase my first home, I realized my perfect rent-paying record had not helped my overall credit score. I remember the feelings of frustration mixed with fear that it would be eternity until I could reach the ideal three-digits that mean so much to mortgage lenders.
As a property management company, we know that most renters are looking ahead to a future that includes homeownership and wanted to find a way to aid them in eventually living their American Dream. We also realize that happy tenants are more likely to treat a home with greater care and stay longer term, greatly benefiting our property owners.
A year ago, we found an online payment system (RentTrack) that rewards tenants’ on-time rent payments, helping them build their credit scores. How you ask? Since rent payments aren’t considered traditional debt that automatically gets placed on your credit, like a car loan or mortgage payment, the renter can report this payment data to the bureaus by opting-in to submit their payment history. Any resident that is listed on one of our leases is eligible to participate.
We believe that younger adults and people with limited credit history will have the most gain from this program. With criteria, such as, overall payment history, credit card utilization, hard inquiries, average age of accounts and the mix of accounts being the five main categories that determine credit scores, these two groups haven’t had the time or spending to reach an ideal score. Being able to report on time rent brings them into a more level playing field with other hopeful future buyers.
Offering our tenants online rent payment also provides other benefits to them and us. It’s fast, convenient, efficient and helps us streamline the rent payment process as a whole. Although this is still new to the rental industry, we believe it’s the way of the future. We want to entice our tenants to pay on time and help them become more credit-worthy consumers. We know it will open all kinds of doors to them while building their future!