Many industries report customers’ and borrowers’ payment history to the federal credit bureau. In the self-storage industry, credit reporting can help motivate tenants to pay their rent on time. Facility owners can also use credit score information to determine the potential financial risk of renting to a person.
What Is Self-Storage Credit Reporting?
Self-storage facilities can report their tenants’ monthly payment status to credit agencies, just as credit card and loan companies do. When a tenant fails to pay their monthly rent, the nonpayment status will impact their credit standing.
A tenant’s credit score impacts more than just their standing with your facility — it also affects their ability to secure new credit cards, home loans and auto loans.
Benefits of Storage Facility Credit Reporting
Self-storage credit reporting has been shown to drastically reduce tenant delinquencies. Tenants who want to avoid having a late payment affect their credit score will be more likely to pay on time.
By reporting storage tenants’ payment history to the credit bureau, a facility owner elevates the importance of these payments to the same priority level as mortgage, credit card and auto loan payments.
Credit Reporting vs. Lien Sales
Without credit reporting, tenants can withhold payment indefinitely with no impact on their credit score. Facility owners can only take action by placing a lien — or legal claim — on the storage unit contents to recoup their financial losses. However, you must follow certain procedures and time frames to place a lien. In some states, you may have to wait up to 90 days to take any lien action. Credit reporting provides more immediate consequences for delinquency, making it an effective deterrent to late payments.
Credit reporting can also increase your chances of collecting unpaid debts. If you have unpaid rent after conducting lien sales, you can report that information to credit agencies. If the tenant wants to eventually improve their credit, they may decide to pay off their self-storage account to clear the tradeline on their credit report.
Checking Tenants’ Credit
Self-storage facility owners can also include a credit check as a condition of tenant approval. Using a credit check as a tenancy condition allows you to evaluate your potential risk of renting to the person with independent information. Rather than turning away a customer based on your assumptions about them — which could cause someone to accuse you of discriminatory rental practices — you can rely on third-party financial data and apply the same standards to all potential tenants.
Checking customers’ credit also helps you verify their identity, ensuring there’s no false personal information on their lease.
What’s more, credit checks are typically inexpensive, and you can run them online in a matter of minutes. This quick, low-cost method of evaluating tenant risk can help you avoid nonpayment issues down the line.
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Investment Real Estate, LLC is a top self-storage real estate company. We broker self-storage facility sales throughout the mid-Atlantic and Northeast. We also provide property management services, feasibility studies and self-storage development expertise. Contact us today to learn more.