Introduction to Credit Reporting

Well, welcome back. Thanks for taking the time. This video's gonna be a little longer because it's kind of the foundational video for the rest of the series. If you can get your head around these four components, then you'll be able to understand the difference between, the various companies out there that are trying to sell you credit reporting services. So take down, get a pencil and paper, take some notes, because if you get your head around this particular video, you'll be well prepared to kind of see through

the fog and tell the difference between what is good information and what is disinformation, whatever that term means. So talking about the truth about credit reporting and today's video is for requirements to affect somebody's credit score. Remember we said in our initial video that the assumption is if I report to the credit bureau, I'm affecting people's tenant score. And we realize that in the new world of credit reporting services ain't necessarily so, okay. And we're trying to figure out, who is affecting people's credit score and who isn't.

Direct Membership Importance

And so I'm gonna give you the four ingredients for how you affected tenant's credit score. Okay? So let's go through 'em. Number one, you must be a direct member of the credit bureau. Now, 30 years ago, I stumbled into a direct membership with Equifax.

So I have 30 years of hands-on experience with reporting every single tenant, every single month to the credit bureau and dealing with all the issues of the credit bureau. So I was a direct member, just like GMAC Finance make me better, smarter. It was an accident. I stumbled into it. I wasn't bright, I just figured it out.

And, you know, joined to go, oh, I, there were, were no tenant screening services back then. I needed a credit report. That's why I joined Equifax.

Third Party Reporting Issues

Now, in today's world, you're not a direct member of the EQU of the credit bureaus with most of these so-called credit reporting services. So let's kind of examine that. In most of the services today, a third party is drawing information from your database and reporting some of that information to the credit bureau. In other words, there's about six companies. And through this video, I'm gonna name companies.

I'm gonna tell you who they are and what I've discovered. I'm not diminishing the company. They got a model and, and they're in a price system, and that's fine. I just wanna make sure you, the customer understands clearly what you're getting and not getting for the money that you're paying these reporting services. And there's a lot of fuzzy out there.

So when there's a third party like this, you're reporting to a third party and that third party is reporting to the credit bureau. Things get dropped. So you can report negative and positive. You can tell people about you got a thousand doors, you're gonna have 150 tenants out there with outstanding tenant charges, some unpaid late fees and bounced check charges, maybe some C O V D rent. And the, and the, the reporting company has their own agenda.

They'll only report certain kinds of that information to the credit bureau. You know, they don't, most of 'em don't report unpaid tenant balances. You can't collect on unpaid balances and affect tenants credit scores. Most of the data that the third party gets from you, they're dropping that information out and reporting only positive things to the credit bureau. Now, I'm gonna give you some source documents, let you read it for myself, but, or read it for yourself.

But let's kind of play this idea out. So here you are and you're gonna give your information to AppFolio. Now, AppFolio is probably one of the top two or three, property management software systems out there. I use them for seven or eight years. They're rock stars.

They have a credit reporting system built into their software. But, and, but AppFolio is not the credit reporting company. They're just gather, gathering data. They're sending it to Rent Bureau. Okay?

Rent Bureau gets the information and a whole bunch of that information is dropped when Rent Bureau reports it then to Experian. So just like this situation up here, the third party people gather the information, but they're only reporting certain kinds of that information to the credit bureaus and not affecting the tenant's credit score. That's the difference.

Full Reporting Requirements

That's what you've gotta be asking. Now here's another one. Many of you are reporting to second nature. Second nature reports to pinata, pinata reports to the credit bureau. Well, again, here in this situation, you got two third parties here, you got two third parties that are in the middle of the data transfer.

And guess what? The credit bureau is not getting all the data. So you're not affecting tenants credit scores. Okay? So th this is kinda what's being sold to us today in the property management community over, over the last four to six years that looks and smells and tastes like full reporting and isn't.

So you gotta understand if you're working through a third party and they're delivering the data to the credit bureau, just the question is, are they delivering all the data that comes outta your database? Unpaid balances, unpaid Covid grant, you ask 'em, pin 'em down, I've done it. I've recorded the conversations. It's not being reported to the credit bureau. Now, when I was in this, 30 years ago, I was a direct member of Equifax.

Now it's only when you become a direct member of Equifax that you have the full B, not Equifax, but of a credit bureau. You have the full bucket of services that the credit bureau benefits you from, from a membership. You can raise tenants credit scores every month. You can, you can diminish tenants credit scores, you can report a judgment. You can really affect somebody's credit score.

And we did for 30 years. That's what kind of makes me a little more familiar with this with most people. I'm not an expert, but I've been, I've used it for 30 years. I know something about it. So your membership directly with the credit bureau is what makes the difference between, we report to the credit bureau, but it doesn't affect tenant scores, or we report to the credit bureau and we affect tenants credit scores every single month.

And whatever data we provide is fully engaged with the credit bureau. Positive and negative. Now, when you, when you become a member of a credit bureau, some things are, this will tip you off as to whether or not you're a member or not. Number one, you make an application to the credit bureau. I've talked to these other service providers and you give them an application.

You don't make application to their credit bureaus. You make application to the third parties that are gathering the data out of your software system. There's an application to the credit bureau, okay? Nobody's doing that, that I can find except one company. Okay?

Secondly, you pay a fee. When I joined Equifax 30 years ago, I paid a fee. If you joined service provider today, and I'll point out to 'em which one you should, you'll pay a fee. I mean, it's like 3, 4, 5, 6, $700 to join a credit bureau. They don't let you do this for free.

Golly Ned, they're dealing with Visa and Target and, and GMA C Finance. They don't expect, you know, nobody expects to sign up with a credit bureau for free. These people have memberships to sell. It'll cost you some money. And if you joined one of these other services, you joined one of these other services, didn't cost you anything, did it.

Well, that's a clue, right? You know, I'm not a member of the credit bureau, okay? So you pay a fee, you prove who you are. Credit bureaus do not want a bunch of Yahoo assess direct members. If you've, if you're a new property manager and you got 30, 40, $50, I don't think you can join any credit bureau.

If you are a private owner and you manage six rental houses, they don't want you in the credit bureau. This is big boy game.

Credit Bureau Membership

You know, this is big stuff. This is, this is up in a whole different atmosphere than you're accustomed to dealing in to be a direct member of the credit bureau. Just think about that. I mean, I mean, this is, you're, you're up there with some very, very big players. So you've gotta prove who you are.

You've gotta provide some documents to the credit bureau to make sure they can assess and figure out whether or not they want you to be a member. You've gotta give them maybe a real estate license. If your state requires one, they might ask for a copy of your management agreement or a business license. They're not gonna let you become a member of the credit bureau just because, just because you fill out an application. So it's not hard.

They just wanna see that you're for real. So we, we had one guy try to, apply to a, a credit bureau and they asked him for a copy of their es of their escrow account. Well, look, the guy didn't have one. Guess what? You know, they turned him away.

There's a process to go through to become a member of the credit bureau. And if you're not going through the process, that's kind of a, that's kind of a clue, isn't it?

CredHub Introduction

So you got a property, you got this model, okay? Become a direct member. Now, I've only found one company so far in the last three or four years of studying this and really digging into this. I've only found one company that'll make you a member, the credit bureau and give you a platform on which the data can go through to provide it to the credit bureau. That company is CredHub.

They've been in business since 20 18, 20 19. They've had a booth at conferences. But since all these other secondary kind of minor league companies have come into the space, there's a lot of confusion as to whether or not CredHub for their fees providing the same service or a better service than these other companies that are out there. So when you deal with Credit Hub, you pay a fee because you're becoming a member of a credit bureau.

When you come into this credit bureau world, to affect people's credit score, you're gonna fill an application, you're gonna provide evidence that you're for real. And if you don't have a real estate license and your state requires one, if you can't have a show 'em a management agreement or an escrow account, you know, good luck. You're not gonna be able to join them. So the whole idea be if you wanna affect tennis credit score number one is you become a direct member of the credit bureau. It's your trade line, your company name shows up on the credit report and they have a bunch of rules that you need to follow.

Okay? I've followed 'em for 30 years. It's not difficult, it's just that there are rules to follow. Now you must have a direct membership with the credit bureau. That's number one.

I'm gonna pause here and I'm gonna go to another video cuz I'm trying to keep it within that six to eight minutes. So the next video in this series will cover number, 2, 3, 4, and you'll have a much better understanding of what it means to be able to affect tenants credit scores and tell the difference between the minor leagues and the major leagues. Thanks for listening. Hang on. Don't go anywhere.