As a landlord, you're no doubt aware of how important it is to screen your tenants before letting them sign a lease agreement. Running a credit check on a prospective tenant, for example, will alert you to any red flags indicating a possible financial risk.
But sometimes, even a thorough tenant screening won't reveal all possible issues. You may have a tenant who pays rent on time but is loud or disruptive to other tenants. Or you might have a tenant who refuses to follow your building's rules, like no smoking indoors at any time.
When a bad tenant rents from you, pursuing an eviction may be an option. That said, often, you'll need to just wait out the situation until the lease in question expires and then refuse to renew it. But what happens when that bad tenant tries to rent from someone else? What's to stop that person from torturing another landlord?
Thankfully, you're not powerless when it comes to warning other landlords about bad tenants. You just need to follow the rules.
Reporting bad tenants to credit bureaus
The rules of reporting bad tenants to the three major credit bureaus -- Experian (LSE: EXPN), Equifax (NYSE: EFX), and TransUnion (NYSE: TRU) -- are pretty strict.
Generally, to report tenant activity to these bureaus, you need to be managing a fairly large number of tenants, the specifics of which vary by bureau (TransUnion, for example, requires 100 subscription accounts or more before you can report tenant behavior). But assuming you qualify, you'll need to be prepared to report all tenant activity to the major bureaus, not just negative activity, and do so regularly.
If you don't manage a large number of tenant accounts, you may be eligible to use Experian's RentBureau service to manage your rental payments and ensure those payments get recorded into each tenant's history. But both you and your tenant need to agree to using this service.
Furthermore, tenants must be notified within 30 days of you submitting a report about their payments to a major credit bureau, regardless of whether that information is positive or negative.
Participating in bad tenant lists
While the rules of reporting tenant activity to credit bureaus are pretty rigid, tenant lists are a different story. With a tenant list, you register for a database where you can log information about the tenants you've rented to.
The upside of these lists is that they let you report bad behavior that's not financial in nature. For example, you can tell a credit bureau a tenant is chronically delinquent on rent payments. But what if that tenant consistently pays on time but creates a hostile environment for your other tenants? That's not information you can convey on Experian, Equifax, or TransUnion, but you can share it on a tenant list like The National Tenant Reporting Company.
Don't keep bad tenant information to yourself
Once you rid yourself of a bad tenant, you could adopt the attitude that the person will soon become another landlord's problem and call it a day. But just as you'd prefer to be warned about a bad tenant, so too will other landlords appreciate that courtesy. Reporting a bad tenant legally is a good way to spare another person the stress you had to go through yourself.