One relatively recent innovation in the world of property management is the ability for residents to build credit when they pay their rent. Essentially, rent payments are reported to major credit bureaus, which gives residents a new way to show that they make payments on time and allows them a path to increasing their credit score.
The advantage of a service like this for residents is obvious: they can increase their credit score with no extra effort just by paying rent, which they already do anyway. But the arrangement offers some perks for property managers as well. Here are three top reasons to consider offering this type of program to your residents:
1. You’ll increase your on-time payment rates.
Residents can increase their credit score by paying rent — but that only works if they pay on time. That means that, if you offer a way for your residents to build credit by paying rent, you’ll be giving them an extra incentive to make sure their payments are submitted on time. Unlike most other incentives to pay on time (like late fees or the threat of eviction), which are negative incentives and can create awkward situations between you and your residents, the opportunity to build credit is a positive incentive — a reward, as opposed to a punishment to be avoided. That’s an important difference, and offering this type of incentive will make some of your residents far more willing to always pay on time.
2. You’ll boost digital signup rates.
Usually, for a rent payment to be reported to a credit bureau as part of a program like this, it has to be made digitally. This will encourage some residents who might not otherwise be willing to make their rent payments online to give it a try — and the more residents who pay online, the better it is for you. Digital payments are far easier for property managers, because they eliminate the need for you to deal with paper checks, money orders, and cash. If a credit-building program can get more online payments coming in, it will make your life a lot easier.
3. You’ll have an advantage over your competitors.
Think about it: if the opportunity to build credit through rent payments is so good for your residents, of course they’ll want to live at a property that offers them that opportunity. If your properties offer a credit-building program and other comparable properties in your area don’t, you’ll be able to attract more potential residents and give yourself a better chance of retaining them when their leases are up. That, in turn, allows you to avoid expensive and stressful tenant turnover, which can be a big boost for your business.