7 Ways to Make Money with Credit Reporting

Introduction to Credit Reporting

Greetings. I'm Robert Locke. Thanks for taking the time to watch this video. I'm a national trainer in the property management industry, and I had a full credit reporting service with Equifax for over 30 years. So I know an awful lot about the credit reporting space.

This video is talking about the truth about credit reporting for property managers. Just within the last couple of years, there's been an awful lot of noise out there about managers being able to report to the credit bureau and affecting tenants' credit. An awful lot of the information is wrong. A lot of myths out there, an awful lot of salespeople that are misstating what the facts are. So I thought I'd take a minute and bring some intelligent thinking to this.

Since I had that service for 30 years, I know an awful lot about it. And they're going to learn something here. Now, this is a heavy video. This, you can actually think. So if you're returning emails and talking to staff during this, you should really close it down and come back to it another time because this is going to require some full concentration.

History of Property Management and Credit Reporting

So let's talk for a minute, and number one, full reporting has been withheld from property management for the industry for 30 years. Thirty years ago is about the time the tenant screening companies came into existence. I got into property management before that time. I stumbled into a membership with Equifax and was grandfathered when they cut out the property management industry from being connected to the bureaus. When the tenant screening service companies came out, the credit bureaus stopped dealing with property managers, early '80s.

So it has been 30 years, three decades, since the credit bureaus have been open to getting reports from property managers on the payment history of tenants. And there are very few property managers that had a direct connection to Equifax. I happen to be one of them. So let's talk through this and see if we can't get some of the cobwebs out of the way about credit reporting for property managers.

Credit Bureaus and Reporting Services

So number two, we know there are three credit bureaus, but there are many service providers. Now, what does that mean? What's the difference between the two? I'm going to grab some slides that we used on another video for this, talking about power over tenants. Some graphics to give you a little better idea, help you see as well as hear what's going on with this.

So there are three credit bureaus. Right? One of them is Equifax. Okay? One of them is Experian, and as we know, way down here in the corner, one of them is TransUnion.

So those are the three. But all credit bureaus are not the same. Well, we make a mistake to thinking as Experian is the same as TransUnion, is the same with Equifax, and it's not really true. I'm going to try to clear that up a little bit as we go along. Now, you can't deal with the credit bureaus.

You're too small. They're not going to deal with you. They're going to deal with a mortgage company, where they're reporting thousands and tens of thousands and hundreds of thousands of people a month. They'll deal directly with a credit card company or GMAC Finance. You're not big enough.

They just won't deal with you. You're too small. I was too small, just got in early. Okay? So what happens is, reporting services have come about over the years to take the data from companies like property managers and put it in the format needed for the credit bureaus to accept that information.

We had a virtual assistant go out and do some research. I think we found 23 different reporting companies. There's RentGuru and rent this and rent that and Report My Rent and Report Credit, RentCredit. There's just tons of them. There's basically three and a half, almost four pages of reporting services out there.

Why? Because customers all over the country in different industries want to report their customers to the credit union, and so these reporting services came about in order to solve that problem.

Types of Reporting

Okay? They're the middleman between a customer, whether it's a property manager or a car dealer, whatever, they're the middleman to report the information to the credit bureau. Credit bureau doesn't want to deal with a property manager. Okay? Credit bureau now wants to deal with an expert, somebody that's built a platform for this.

Now, what the reporting service does is they reach into your tenant data every month, and they pull information, they configure it, and they report it to the credit bureau. So it's nothing fancy about it. In fact, most of the companies out there, in fact, we couldn't find anyone but one, okay, do partial reporting. Now let's clarify what that means. There's full reporting and there's partial reporting.

Full reporting is what the mortgage companies do. You don't pay your mortgage, they can crash your credit. They can create a report to the credit bureau say you're delinquent, and they can really hurt your credit score. You don't make your car payment, they can report to the credit bureau and hurt your credit score. That's called full reporting, and nobody in the industry has had full reporting for the last three decades.

There is a new company that came out, it had full reporting for property managers, and that's what I want to clarify today because there's only one that I can find. So full reporting versus partial reporting, okay? Partial reporting is positive reporting only. If you're a Credit Hub member, for instance, or an AppFolio member, you can go into AppFolio and you can click a button, and all your tenants will be reported to Experian every month, but it's partial reporting. That you can't hurt the credit score.

They're not going to call you up and get mad at you. You're not going to motivate them to pay their outstanding tenant charges or do post-move-out collections. It just doesn't happen because all of these companies, including the AppFolio system, do partial reporting only, positive reporting only. Now, why do they do that? Why are these service providers only reporting positive?

Several reasons. One, it's safe. If you only report positive to the credit bureau, tenants will never be mad at you. You can't hurt their credit score. Why would they be mad?

Like- Kind of like me with my grandkids. If all I do is pat them on the back and celebrate them and never exhort them or challenge them or rebuke them along the way, they're going to turn out to be really weird. Well, they're really weird anyway, but... And these service providers now do this service. It's free to the service provider.

In other words, the credit bureau doesn't charge them anything. So you can go in and sign up to AppFolio, click a button, they won't charge you anything because partial reporting is free. If anybody comes to you and says, "We do full reporting, but we only do partial reporting for the property management industry, and you should pay us something for that", don't pay them for it. This service is free, and there's plenty of platforms out there that you can report rental history for free. Okay?

The next reason is there's no power over tenants if you're doing partial reporting. If you report through AppFolio or any of these other services, you can't hurt a tenant's credit score. Okay? They'll never be mad at you. There's no power to collect rent at all.

If you sign up for a service, you're signing not for the bureau. In other words, when you sign up with one of these reporting services, you're not signing up with the bureau. You're signing up with a reporting service, and it's much, much simpler. It's a one-page form. They'll take your data, move it over there.

There's no real significant effect, so you're not signing much. There's not much involved. Number four, full reporting requires serious paperwork. Now, what do I mean by paperwork? If you're going to join a service that reports positive and negative to the bureau, you actually have to become a member of those bureaus.

Even though you're going to report through a reporting service, a middleman, you have to fill out the paperwork as if you're joining the bureau.

Paperwork and Verification

That paperwork includes a very lengthy, a three-page application, proof of a management agreement, proof of a real estate license, if your state requires one, proof of a business license. You're for real. They want to know you're really in the management business. They don't want to deal with hackers. They don't want to deal with people who are hip shooters and gunslingers.

They want to know if you're reporting positive and negative, this is serious business. They want to really know that you're for real. Now, reporting services that deal with property managers that do full service, full reporting, there's a lot of paperwork involved. If some service comes to you and says, "Sign this piece of paper and I'll report all your tenants to the credit bureau," you need to turn around and run, because that's just doing positive reporting. They might say they're doing negative reporting, but if you haven't filled out all this paperwork for the actual credit bureau itself, TransUnion and Equifax, all they can do is positive report, no matter what they tell you.

Control Over Reporting

Now, number five, you want control over who you report because you'll be responsible. You'll be responsible for misreporting. In other words, if you're with a reporting service and they're reporting positive and negative, you do not want them making the decision of who gets reported negative. You know why? Because if you are wrong and you report somebody negative and it hurts their credit score, you can get in deep doo-doo over that.

You're really in the big leagues, and people's credit scores are protected by all kinds of federal laws. You've heard, I think, of the Fair Debt Collection Practices Act. You think property management is toxic. Wow. Get into the debt collection business.

That's really toxic. So if a service comes to you and says, "Fill out this piece of paper and I'll report all your tenants to the credit bureau," that's fine. You shouldn't pay for that because it's free. It should be free. But if they're doing positive and negative reporting, your application is going to take you a couple of days to fill it all out.

It's kind of an arduous task, but well worth it. Well worth it. And then that reporting service should send you a spreadsheet every month.

CredHub Reporting Service

And the one that we use, the reporting that we do, is we found CredHub. CredHub is the only company out there I can find that is designed for property management industry where you can do both positive and negative reporting. But they're not going to make the decision for you, trust me. They're going to send you a spreadsheet so that you, as the property manager, are going to report who owes you an outstanding balance. Why?

Because if something goes wrong, CredHub doesn't want to be responsible. No service provider wants to be responsible. They're just a platform to report what you give them. And so if somebody says, "Don't worry about the reporting, we'll handle it all for you," well, then they're doing partial reporting only, positive only. Because if they were doing positive and negative, you would not want them to do the reporting and making the decisions as to who gets reported negatively.

So the way CredHub does it is they send you a spreadsheet, and you have total control over it. You get to control what day of the month the spreadsheet comes to you, what day of the month they go into the database and pull that information. Then you get to control who is reported paid as agreed and who is reported with an outstanding balance. So if you've got 1,000 properties, you're going to have to invest 15 to 30 minutes a month to look at this report and look at the people who have got an outstanding balance, so when you pull the trigger and submit that report, you're reporting it accurately.

So the third control is you get to decide when that information is sent to the credit bureau. Okay?

Cost and Markup

Now let's talk about the cost, just for a minute, of this service. The cost, number one, is a setup fee of $500. They got to go into your database, figure out where your fields are. A lot of corrections to go on and things to figure out and to put the platform together that's kind of customized for the way your software works. The second one is the cost to you is $3 a month for credit reporting.

Now, what is the cost to the tenant? It's whatever you decide it to be. I've introduced 30 or 40 different managers to CredHub. Some of them charge $9 a month and cost them $3. That's a 300% markup.

That's a big number. Most of my clients are charging $10 a month per tenant, and that cost them $3 a month, so that's a 300%, 400% markup. Really good markup. Big moneymaker. But the point I was trying to make is this, you have to have control.

You don't want to relinquish control to a service provider. You don't want somebody else making these decisions for you. Okay? So let's move the conversation along.

Why Use CredHub

Why would you want to use Credit Hub? Let's just talk that through. Number one, they designed it specifically for property managers. Took them about a year and a half to build the platform, and they're not property managers, they're technologists. They're data management people, and so I partnered with them about a year and a half ago when I saw this because I had 30 years of actual practical experience using Equifax and reporting people to Equifax.

And so they're technologists, I'm the practical boots on the ground guy that dealt with this for 30 years. So we have an awful lot of training we can help you with to implement it and do it just right. Now, the reason they are full reporting, right? They don't do partial reporting now. This is not kids play.

It's not elementary school. This is big boy stuff. This is you got me right up there with the mortgage companies and the credit card companies. This is serious business. This will put power in your hands you've never had before with tenants.

And it gives you control over who is reported.

Training and Support

So how do you find out more about Credit Hub? You can go to credhubsupport.com/reasons, as in reasons why you should join Credit Hub. I've put about 15 videos out there. You can just watch them at your leisure on all the reasons, and it'll deal with every question that comes into your mind as to why this wouldn't work for you. We're kind of instinctive at that, aren't we?

"Here's why it won't work for me." Well, I've dealt with all of that in these videos, credhubsupport.com/reasons. Want to reach out to-- And oh, by the way, we put in training videos. We have documents, letters, dialogue. We've set up over the last year the letter to your current tenants, the document that you want them to sign when they move in, the document that they sign, and the renewal date. You don't have to figure any of this out.

I've been figuring this out for them for the last 30 years, and I've put all the videos and the training material together, made it really easy for you to engage with Credit Hub. Now, we will train on implementation. We will train on collecting unpaid tenant charges that are sitting out there in your tenant ledger, and we will train in post-move-out collection. So this is the truth about credit reporting for property managers.

Summary of Reporting

Let's summarize. Partial reporting is free. You don't pay anybody to do positive reporting only, okay? You shouldn't buy somebody's bundle of services that includes positive reporting only and pay for it. You just shouldn't do that.

It's free. Full reporting gives you your power over tenants. Full reporting gives you power over tenants. Okay? You have power in your hands when you're doing full reporting that you've never had before.

Remember, you are responsible for misreporting. You don't ever want to delegate that to another company. So again, if a service provider comes out and says, "We do full reporting, sign this paper and we'll do it for you," you need to run.

Credit Hub Benefits

Okay? Run from that. It'll really hurt you in the end. Credit Hub has figured it out. It's fully automatic, and yet you control every submission.

It's very, very affordable. It's very inexpensive. And here is, again, how you reach out and find out more information, credhubsupport.com/reasons. We got all the training videos, the documents, the dialogue. One last thing before we go.

Free Resident Rewards Package

If we give away a free resident rewards package, there are people out there that say, "We'll build your resident rewards package if you'll buy a whole bunch of services with us." I'm not talking about that. I'm saying we'll do a free customized to your model resident rewards package. Beautiful designs, give you several choices of designs to use, give you a whole list of benefits that you can select from that we'll put in your resident rewards package. We'll deliver it to you. You get to modify it, change it, tweak it any way you want.

Find it at trainingpropertymanagers.com/rewards.

Clarifying Credit Reporting

Well, that was a little longer than I expected, but you need to know the truth about credit reporting. A lot of misnomers out there, a lot of salespeople telling you the wrong thing, a lot of myths, a lot of fuzziness. I hope that clears it up just a little bit. If not, give me a call. We'll have a private conversation, and I'll help you wherever I can.

Thanks for hanging out with us today.