Late rent reminders are part and parcel of property management, and there are few property managers that have not had to deal with this inconvenience. For smaller organisations, the dangers are more acute, because if several tenants are late at the same time, the company can be left with cashflow problems.
The market has come up with new ways to deal with this problem, and several rent reporting companies now link rent payments to the credit agency Experian’s rental exchange, to incentivise tenants to pay their rent on time. The reporting mechanism has both a carrot and stick function, in that while it rewards tenants who pay their rent on time, at the same time it has consequences for those who don’t.
According to Henry Yates, CEO of Credit Builder, a credit reporting company who specialise in credit checks; “the reason our clients love our service is that it operates in the background. Landlords can be confident that good tenants that pay on time are being rewarded, and conversely, any that pay late have their payment performance reflected in their credit rating. ”
Carrots and Incentives
By contracting the services of rent reporting companies, property managers can incentivise tenants to pay their rent on time by feeding their payment information to the credit agency, so when they pay on time, they boost their credit rating month-on-month. If you have tenants that pay their rent on time continually, it is actually a reward for them, as they will see their sense of responsibility rewarded in way that wouldn’t often happen. Marketed properly, the credit builder score could be used as a selling point for tenants, as it gives them a chance to build their credit score month-on-month, and could be differentiator in driving you more business.
Sticks and Deterrents
For property managers struggling with tenants who are routinely late, using the service will mean that tenants who don’t pay their rent on time will see their credit score diminished. Rather than having to send warning emails about late payments yourself, the system itself acts as a deterrent as tenants don’t want the bad credit. Thanks to the automation of the reporting, the system will notify Experian by itself if a tenant misses their payment date, so you don’t have to do it manually.
If you are a property manager who has issues with late payments, you will likely see an improvement in your tenants’ rent punctuality, as impacting their credit score is a more severe predicament to find themselves in than receiving an email reminder.
The benefits of the system are that it can be a win-win for the property manager and the tenant, the tenants have a further reason to pay their rent on time, and get rewarded for their punctuality, and the property managers benefit by keeping their house in order. For those property managers who have issues with rent payments, it will give tenants greater motivation to pay their rent on time so as not to affect their credit score.