03 May 2011

Credit Bureau Holds The Keys

Credit Bureau, Credit Report, Credit Score No Comments

Adv Randolph Samuel @ Lucid Living

Have you tried to rent a property, but been unsuccessful? Have you been advised of the reason why you were rejected? There is a good chance that the reason why no one wants to rent their property to you – is because you have been blacklisted with the credit bureau.

Most people are unaware that there are 11 credit bureaus registered with the National Credit Regulator. TPN Credit Bureau is one of the lesser know credit bureaus.

TPN maintains a national database of consumers who rent property. According to the TPN website “… the TPN database has grown to become the most comprehensive and up to date authority on tenant behaviour in South Africa.”

This includes a history of the consumer’s monthly rental repayments and blacklisting where the consumer defaulted on their rental. “TPN’s unique database stores the payment behaviour of tenants. This information assists the landlord in making decisions with regards to affordability and willingness to pay when placing a tenant,” according to TPN.

If you have previously defaulted on your rental payments and are blacklisted on TPN’s database, you are unlikely to secure that new home, if your prospective landlord screens you on TPN.

The negative effect of defaulting on your monthly rental commitments also erodes your credit worthiness and credit score in general.

TPN contributes its “rental payment profile” to TransUnion credit bureau and Experian credit bureau. This information is then included in the respective bureau’s payment profile information, which influences your credit score and is made available to all credit grantors, like banks and furniture retailers.

According to TPN, “our biggest contribution to the property industry has undoubtedly been the creation of a rental payment profile – another global first – which gives tenants the opportunity to improve their credit scorecard while renting premises.”

This trend is an international one. In June 2010, Experian (US), one of the big three credit bureaus, announced its purchase of RentBureau. RentBureau has a program that allows participating property management companies to feed rent payment histories directly to the bureau. The information will supposedly make its way to credit reports and FICO scores.

Whether this is a good thing for tenants is debatable, however. A careful look at RentBureau’s website reveals just how problematic this new program is. The website page for residents strongly suggests that only positive rental histories will be reported (“In the past, only negative rental-payment data such as evictions and collections were reported to consumer reporting agencies.”).

The page goes on to hype the benefits of having one’s “on-time rental payments” figure into credit scores, thereby helping tenants “establish or rebuild (their) credit” and “qualify for what (they) deserve.”

The refrain on the tenant screener’s page, however, carries a different tune. RentBureau’s pitch is that by accessing the “comprehensive positive and negative” (emphasis added) data supplied by property managers, the people who screen applicants will reduce the risk that they will admit tenants who will later skip out, require an eviction and cause bad debt write-offs.

For the property management companies, the bureau notes the continuing need to “identify risky residents and accept more good residents.”

While TPN’s website makes similar statements of reciprocal benefits for both, tenants and landlords, its homepage undoubtedly sums up its value proposition: “Thanks to quality information from TPN for all property investors, real estate agents and landlords, delinquent tenants will become somebody else’s nightmare.”

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