Rent delinquency is increasing and as we all know, resident priorities are shifting as well. This is causing the multifamily industry a lot of uncertainty during a time of already rapid change. Due to these changes in wants and expectations, multifamily companies must start strategizing for the future to ensure profitability and continue to create places that residents want to live.
It is always important to listen to the customer, which is something that is often overlooked in this industry. Yet it is also important to make sure that they are following their agreements by paying rent on time and that they have the ability to do so. Everyone is looking to raise rents to meet certain revenue goals; however, there are other issues going on beyond the scope of rent increases.
We invited one of our clients, Lisa Strauser from CredHub to speak on what they are doing to alleviate some of these stressors.
CredHub is a service that companies in the multifamily industry incorporate to help reduce multifamily rent delinquency. It works by associating rent payments to tenants’ credit reporting agencies. For most tenants, that’s a great thing – it allows them to use their largest expense as a way to improve their credit scores, just as mortgages do for homeowners. For others, it’s the extra incentive they need to pay their rent on time, so their credit score isn’t brought down by a late or missed payment.
Lisa Strauser is the Sales Director for CredHub. In this recent interview, she discussed some of the ways the multifamily industry is struggling, as well as how it can improve.
Strauser says the way to make sure properties aren’t bleeding out revenue to delinquent payments is to make sure their residents are truly held accountable for their rent. If they aren’t held accountable, there’s no incentive to make their rent payment a priority among their list of bills.
By implementing resident credit reporting, Strauser says that the accountability factor is put in place immediately. In fact, she says properties that implement CredHub’s technology see the delinquency rate lower within a period of just 60-90 days.
“The delinquency rate naturally reduces when there is finally a consequence for not doing what one is supposed to be doing,” explained Strauser.
CredHub also goes above and beyond by impacting credit scores for previous residents who still have an outstanding balance with the property.
“Impacting their credit for balances owed has a way of motivating people to pay outstanding expenses to remove it from their credit report,” said Strauser.
She says that although CredHub aims to ensure rules are followed, the company’s work isn’t about punishment – on the contrary, it’s about helping boost those who are paying on time, typically boosting FICO scores by 42 points. It levels the playing field between renters and those with mortgages who see improvements for on-time payments on their living space. Some people are credit invisible and can use this as a way to leave their mark.
“For those with established credit profiles, the increase in FICO scores leads to an offering of better interest rates on credit cards and higher credit limits,” said Strauser. “For those without social security numbers, in assisted properties, or lacking social security numbers, it establishes for the first time a credit identity by rewarding them for their timely rental payments.”
Strauser also argues that CredHub can, in some instances, be the final deciding factor in where someone wants to live. It should be included as an amenity, just like a pool or gym, since it’s something intended to improve the residents’ lives. If a potential renter knows they’ll pay on time, they would see an enormous benefit in renting from a property that offers CredHub. Likewise, the usage of that technology would discourage those who know they may not pay on time, meaning the property gets a higher quality resident.
By using services like CredHub, multifamily properties can incentivize residents to pay on-time, increase resident retention and create a competitive advantage for their property. Services like these are paving the way for residents to get credit for one of their most costly expenses and to hold others accountable who may have fallen behind.
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