For example- You have a house that you have a lease option agreement for, the goal is to have the leasing party buy the property at the end of whatever term. By using their lease credits as a downpayment it helps them to secure financing. To further help is it possible to report their rent payments every month to the credit bureau to further help them boost their credit and more easily qualify for a loan?
I think it would be a winning idea if possible as a selling point. Find someone with a few credit flaws and no money down that can’t get a mortgage. Lease option to them so they can build a downpayment. Help boost their credit score to make it easier to qualify. Sell them the home and move onto the next one. Can you imagine how many people would line up for this plan? The ad can be something like “Rejected for a mortgage? Rent-to-own from us and we’ll even RAISE your credit score, just for making on-time rent payments!”
Your idea is a good one but it has a few obstacles. You run risks when you lease option a property. One is that the tenant’s rent credit usually gives him an equitable interest in your property and you may have to foreclose instead of evict.
Another risk is what happens if a tenant with an equitable interest in your property files a BK, has a creditor judgment, or an IRS lien? The trust shields you from actions associated with any party’s past bankruptcy, creditor claims and civil judgments, litigation in marital dissolution, probate actions, and even state and federal income tax liens.
I use a land trust with a triple net lease. Because my tenants become owners of the trust and have homeownership benefits, their payments enable them to refinance the property at the end of the lease without having to apply for a purchase loan. It has the same positive effects without having the payments reported to a credit reporting agency.
To report payment information to the credit bureaus, you need access to the Metro 2 reporting system. To gain access to this, you must meet minimum requirements by the Credit Bureaus. The most important requirement is having at least 500 accounts to report.
Unless you have 500 tenants, there is no way to report.
I sent you an email on how I may still be able to help you offer improvement in credit to your tenants.
So it is possible, just not for small time people. Good to know, thanks. If I ever got to that point with that many tenants I might consider doing it even if it’s a not a lease option situation. It would be an incentive to pay on time and it would also be a good way to punish those that don’t pay on time. 500 accounts though, sheesh…that’ll take me a while to accumlate. Imagine how quickly deadbeats would run away when they saw that late pays will go on their credit report? I could probably save myself some hassle and save some money by not running their credit reports during the app process. If they don’t even bother applying due to fear I would be saved a lot of time and money.
