Let’s face it—nobody wants to report unpaid rent to credit bureaus. It can be challenging for landlords and has serious consequences for tenants, so it should only be used as a last resort. Unfortunately, this may be the only way to recoup your lost income.
Beyond benefits for yourself, reporting unpaid rent can also warn other landlords about potentially problematic tenants. If you’re dealing with repeated issues of unpaid rent, though, you’ll need to know how to go about the reporting process and what will happen next.
In this article, we’ll go over your options to collect rent, the steps you can take to report to credit bureaus, and the consequences for renters. Keep reading to learn everything you should know about reporting unpaid rent to credit bureaus.
Step 1: Attempt to Collect Rent via Alternative Methods
Many landlords won’t be able to report directly to credit bureaus because they’ll need to meet specific requirements. Here are a few options you can consider instead:
Seek Eviction
If your tenant repeatedly fails to pay rent, you can evict them for nonpayment. The process can take anywhere from weeks to months and can be costly, but an eviction judgment often comes with a legal order requiring the tenant to pay what they owe you.
Enlist Collection Agencies
You can also send the debt to a collections agency, which will try to chase it down faster than you could. Debt sent to collections also appears on the tenant’s credit history, though these agencies typically charge a fee and a percentage of whatever you recover.
Utilize Rent Reporting
Several companies provide rent reporting services, sharing on-time payments with credit bureaus. This builds tenants’ credit and motivates them to avoid late payments. If the tenant doesn’t pay, you can report the delinquency through your rent reporting service, which provides that information to credit bureaus.
Step 2: Confirm Legal Eligibility to Report Unpaid Rent
Before you attempt to report unpaid rent, you’ll need to check whether you can do so first. Some landlords with large portfolios may be eligible to sign up as data furnishers for credit bureaus, which require a high transaction volume and a merchant account.
Small landlords, meanwhile, can use Experian’s RentBureau, a database that provides rent reporting and a record of tenants’ payment history. Though tenants have to opt in, and RentBureau can’t help with property damage or evictions, it’s a good option for DIY landlords without many properties.
Step 3: Choose a Credit Bureau or Rent Reporting Service
If you’re a landlord who’s eligible to report unpaid rent directly to the credit bureaus, you can typically report to all three: TransUnion, Experian, and Equifax. However, collections agencies and rent reporting companies may report to just one, two, or all three.
When you’re choosing a rent reporting or collections service, look closely at which bureau(s) they report to, the fees they charge, and their process for handling unpaid or late rent. You should also check the security practices to protect your and your renters’ data.
Step 4: Notify the Tenant Before Reporting
There’s no federal law requiring landlords to notify tenants before reporting them for unpaid rent, but many states, counties, and municipalities across the U.S. do. So, regardless of your location, it’s best practice to notify your renter beforehand, just in case.
In some places, you may have to give the tenant time to fix the situation, while others allow you to report right after giving notice. Regardless, under the federal Fair Credit Reporting Act, you must verify that all of the information you provide is correct.
Step 5: Report the Unpaid Rent and Monitor the Account
After double-checking the data for every late rent payment, including dates, amounts, and lease terms, you’ll make your report. Whether you choose a collections agency, a rent reporting service, or a credit bureau directly, follow all instructions closely to ensure your report is taken seriously.
Once the report is processed, the unpaid rent will appear as a delinquency on the tenant’s credit history. Your renter will have to pay their debts or continue to face worsening consequences, so they’ll hopefully attempt to contact you to pay up and improve their credit.
Consequences of Reporting Tenants to Credit Bureaus
Reporting tenants for unpaid rent can cause serious problems. However, these consequences also serve as a warning to other tenants and a reminder to pay on time.
Damage to Credit Score
Unpaid rent appears as a delinquency on credit reports, which can bring down a renter’s credit score. This may impact their ability to find future housing, buy a car, or even get a job. They may also struggle to obtain loans and end up paying higher interest rates.
Strained Landlord-Tenant Relationship
Needless to say, your tenant won’t be happy that you’ve reported them to a credit bureau, which could lead to confrontations. The tenant may even attempt to retaliate, so take steps to protect yourself and your property, and don’t expect to be on friendly terms with them.
Reduced Likelihood of Securing Future Rentals
Since unpaid rent will appear in future background checks, the tenant could struggle to obtain approval for rental housing. Landlords may also ask the tenant to pay a higher security deposit or pay more rent to avoid losing money if the tenant fails to pay rent again.
Using Property Management Software to Handle Unpaid Rent
Reporting unpaid rent to a credit bureau is difficult for both landlords and tenants. Then again, if you don’t do so, your tenant may continue to live on your property rent-free indefinitely. Luckily, property management software can help you prevent unpaid rent issues.
TurboTenant is an all-in-one rental management software that streamlines rent collection. With options like autopay, automatic rent reminders, automatic late fees, and rent reporting, you’ll get fewer overdue or missing payments, and your tenants can build good credit. It’s a win-win situation. In addition to rent collection, the software also offers a variety of other tools to simplify property management, including eviction assistance through a partnership with EZ Evict.
Sign up for a free TurboTenant account today so you can stop worrying about unpaid rent.
FAQs: Reporting Tenants to Credit Bureaus for Unpaid Rent
Can a landlord put unpaid rent on a credit report?
Yes, landlords can put unpaid rent on a credit report by filing with one of the major credit bureaus or by using a third-party collections agency or rent reporting service. Regardless of the method, unpaid rent will appear on credit reports as a negative mark.
Can unpaid rent go to collections?
Yes, unpaid rent can be sent to collections. Though collections agencies typically charge fees as well as a percentage of the recovered amount, this may be one of the most efficient options for landlords with small portfolios who need to report unpaid rent to credit bureaus.
Is it worth reporting rent to the credit bureau?
Yes. Rent reporting encourages tenants to build good payment habits. On-time payments boost tenants’ credit scores, especially if they don’t yet have a long credit history. Landlords can also use these services to report unpaid rent to credit bureaus without a merchant account.
