reporting bad tenants to national credit database

There are few things that landlords find more frustrating than bad, unreliable tenants. When you end up stuck in a situation where you are battling a former tenant for the rent that is due, it might drive you crazy to think that their rental history didn’t indicate any such issues.

And in the future, it’s possible that other landlords will end up feeling the same way about the same tenants!

While property management is, in a way, a competition between landlords, there are a lot of ways that landlords can and do help each other to succeed. One way that they might want to do this is to learn about reporting bad tenants to a national credit database, such as Experian.

But how do you go about reporting bad tenants? Can you simply do this by filling out a form or mailing in some documents? Unfortunately, it’s not that simple. However, it is possible to ensure that bad tenants have to carry that reputation with them.

Today, we’ll discuss the main ways you can go about doing this type of reporting and why it is important that you do so.

A Table of Contents on How to Report Bad Tenants to Credit Bureaus

Why It’s Important To Report

If you’ve managed to get rid of a problem tenant, you might not immediately be thinking about reporting them to the big three credit bureaus. After all, your problems are over. Even if you lost some money, why would you want to spend more time on dealing with the same tenants again?

Ultimately, the main reason that you would want to report bad tenants to credit bureaus is to ensure that they are not able to easily cause the same distress to another landlord without due warning.

Sure, you might be able to finally get the money that you are owed when you hire a collection agency or tell the tenant that you’re going to be reporting them, but it is difficult in most cases. The good of doing this lies in the fact that irresponsible tenants can be appropriately punished and revealed through this report.

While the report is only a small change that reveals a single bad tenant, it can help to protect another trusting landlord just like you.

Method #1: Large Landlords

There are only a handful of situations in which landlords can directly report to the credit bureaus about payment issues by tenants. The main way that some landlords can relate payment information directly is when they are managing and accepting payments on a lot of rental properties.

The specific requirements of how many properties or payments must be accepted on a regular basis varies from one credit bureau to another, but TransUnion requires at least 100 subscription accounts before you can report bad tenant behavior.

For most of the credit bureaus, reporting regularly when payments are made is the only way to ensure that your reporting is taken seriously when payments are not made. If you have been reporting irregularly, you will need to provide more information about what exactly is owed and why. To report in either of these cases, you’ll need to subscribe to the service.

Your Subscription Profile & Reporting

Regardless of which bureau you want to report to or which method you are using, you will need to set up an account on the bureau in question in order to regularly report payment or credit history from your tenants.

To do this, you can visit any of the credit bureaus that include rental payments in their credit score directly:

  • Experian
  • Equifax
  • TransUnion

Once you have a profile, get into the habit of reporting regularly, or use their recommended rent payment services to have everything automatically reported whenever a tenant makes their payment through the service. This method is becoming more and more common, and it can have big benefits for both you and the tenant.

For you, you’ll be happy knowing that the tenant’s payments are secure and on-time. Additionally, you know that the tenant is more likely to pay on time so that their credit score is not affected by late payments.

For the tenant, they have the bonus of knowing that paying on time can help to improve their credit score and help them to buy a house or get a car loan in the future.

Method #2: Smaller Scale Landlords

If you have less than 500 units that you are dealing with, you can use Experian’s RentBureau service in order to manage your rental payments and ensure that those payments are being recorded into the tenant’s history.

When both you and your tenant agree to use this service, rental payments will be transferred from the tenant’s bank account to yours on a regular basis. All payment history, both good and bad, is then reported to Experian.

Of course, there are limitations even with this type of service. While late and missed payments will be reported, things like rental property damage and evictions will not be fully reported to the credit bureau in question.

Method #3: Civil Judgments

After you complete an eviction or a tenant leaves without paying rent that they owe you, you can sue the tenant in a civil court case for the money that they owe you. Even after evicting a tenant, this is often the only way that you can collect the money that you are owed.

If you win the case, this civil judgment will become public record, and the record will eventually trickle down to the credit bureaus. A monetary judgment decided in civil court can take as much as 100 points off of a credit score, and the report will remain on their account for seven years.

Landlords that come across a tenant that has this type of severe judgment on their record is likely to think very carefully before they rent to them again!

Method #4: Collection Agencies

For most small- to mid-scale landlords or property managers, the previous three methods might not be the easiest to accomplish. After all, you have a limited number of resources, and we understand that.

In cases where you cannot afford to take on a new court case or pay for a credit reporting subscription program, you can outsource the debt that a previous tenant owes you to a collection agency instead.

When you bring on a collection agency, you are hiring them to chase down late rental payments as well as any other eviction or damage-related debt that a tenant might owe you. If a tenant won’t pay up, the collection agency can report this to the three major credit bureaus.

Collection account filings cause a serious negative hit to the tenant’s credit score, and future landlords are sure to be wary of this black mark on their record in the future.

Important Responsibilities When Reporting

No matter which route you take to ensure that any bad tenants that you deal with are reported for their bad behavior, you will want to take these important precautions.

  • Always make sure that you have physical and undeniable proof that your tenant owes you payments or debt that you are reporting.
  • Tenants must be notified within 30 days of you submitting a report about their payments, whether that report is positive or negative.
  • Using a subscription service that reports all payments – good or bad – can be a good way to entice tenants to want to enroll in such a program. It can help to raise their credit score if they pay on time – and it can give you peace of mind, too.
  • If tenants don’t agree to make rental payments via a subscription service that records and reports this rental history, you will not be able to report their payments that way.
  • Make sure that you update the credit bureaus as necessary when the tenant’s debts are paid off. If you hire a collection agency to handle the debt, they will be responsible for this step.
  • Keep in mind that reporting payments may cost a small fee. If your tenant is amenable, you can split this cost with them. If they agree to their payments being reported but don’t find it to be a requirement, you may need to foot the bill entirely.

Credit Reporting: Your Choice To Make

Ultimately, whether or not you want to go about reporting bad tenants to national credit database providers, you should keep it in mind as an option. If you came across a tenant with a seemingly clean payment history only to find out that they had been frequently late with payments in the past, wouldn’t you have wanted their former landlord to report this?

Checking credit score and credit reports can be a big part of tenant selection; help other landlords ensure that they are not trusting the wrong tenants by reporting bad behavior (and good behavior!) as regularly as possible.

It’s up to you, but reporting can help tenants be more reliable while they build a higher credit score while also giving landlords like you some peace of mind.