As a landlord, dealing with problem tenants who fail to pay rent or damage your property can be an incredibly frustrating experience. Not only do you suffer financial losses, but the process of evicting them and seeking compensation through the courts is often lengthy and expensive. One powerful tool that Canadian landlords should take advantage of is reporting delinquent renters to the major credit bureaus. This can help warn other landlords while also motivating the tenants to pay what they owe.
Steps to Report Delinquent Tenants to Credit Bureaus
Before reporting a tenant, it’s critical that you have thoroughly documented the situation and made reasonable efforts to collect any unpaid amounts. This documentation will be required by the credit bureaus. Let’s go through the proper steps for reporting bad tenants:
1. Issue Proper Written Notices & Warnings
From the very first missed rent payment, you should start creating a document trail with the tenant. Issue written late rent notices stating the outstanding balance and your expectation for when it will be paid. Follow the notice requirements spelled out in your provincial landlord/tenant legislation.
If the tenant still does not pay or makes efforts to pay after these initial notices, your next step is to begin the official eviction process. This involves properly serving the tenant with a notice to quit/vacate the property as outlined by your provincial laws.
Make copies of all documents and notices issued to the tenant. Log any violations of the rental agreement such as excessive noise, property damage, illegal activities on the premises, or other issues that may allow you to pursue an eviction. Having this documentation will significantly strengthen your case if the dispute ends up in court or facing the credit bureaus.
2. Obtain a Court Judgment
If the tenant remains in your property and refuses to pay after being served eviction notices, you will need to obtain a formal court judgment and order for their eviction and payment of outstanding debts. This step is crucial because the credit bureaus require proof that the debt is truly owed before they will list a negative rating on the tenant’s file.
Bring your full documentation to your local court when pursuing eviction through the formal judicial process. A judge will ultimately decide if you have sufficient grounds to evict the tenant and if they owe any fees, back rent, or other monetary judgments that need to be paid.
3. Write to Credit Bureaus
After receiving your court judgment, you can proceed with notifying the credit bureaus about the delinquent tenant. Two national credit bureaus cover all of Canada:
You’ll need to write an official notification letter to each bureau requesting that the tenant’s unpaid debt and monetary judgment be added to their credit report. The letter should contain:
- Name, current/last known address, date of birth, and SIN number of the tenant
- Details of the landlord-tenant relationship and rental property address
- Monetary judgment/debt amount owed according to the court order
- Explanation of your efforts to collect the debt from the tenant
- Copies of the court order and any notices/warnings issued to the tenant
You’ll also need to submit:
- Copy of the monetary judgment/court order
- Proof that you provided proper written notices to the tenant
- Record of any returned/bounced rent payments
- Invoices detailing what the tenant owes (rent arrears, cleaning/repair bills, legal fees)
- Details of any attempt to collect the debt through a third-party collections agency
- Application fee as required ($20 for Equifax and $14-20 for TransUnion)
The credit bureaus will review your submission and determine updating the tenant’s credit file. They typically give the tenant a brief window (30-60 days) to dispute the debt before finalizing the negative report.
4. Impact on Tenant’s Credit Report
If the credit bureaus agree that your evidence and documentation are sufficient, the tenant’s delinquent debt and monetary judgment will be added as a collection item on their credit report for 6-7 years. This negative record can significantly lower their credit score and ability to obtain new financing or rental agreements during that period.
Essentially, the goal of reporting bad tenants is both a punishment for their delinquent behavior but also a warning to other landlords and creditors about dealing with this individual. Having their debt and eviction court record publicly visible provides strong motivation for them to pay the outstanding judgment.
5. Recover the Unpaid Debt
Simply reporting a former tenant’s debt doesn’t guarantee you’ll get paid eventually. However, taking that step does increase the likelihood of recovering your losses through a few potential avenues:
- Tenant pays to have the mark removed from their credit before it lapses.
- Tenant pays the debt after being denied future rental opportunities due to the negative report.
- Debt is recovered if the tenant declares bankruptcy.
- Working with a third-party collections agency that purchases the debt from you.
While reporting bad tenants won’t instantly get landlords their money, it’s an important tool to increase the odds of eventually collecting and preventing them from becoming a repeated problem for other landlords.
Different Reporting Options For Small Landlords
Here are some different reporting options for small landlords when dealing with delinquent tenants:
1. Experian’s RentBureau Service
Experian’s RentBureau Service is an option for landlords who own less than 500 units. This service automatically deducts the tenant’s rent from their bank account and reports the tenant’s rental payment history directly to Experian. However, it’s important to note that the tenant must opt-in to this service. Additionally, the RentBureau Service does not cover evictions, property damage, or other signs of poor behavior from the tenant.
- Hire a Collection Agency
Hiring a collection agency is another option for small landlords dealing with delinquent tenants. A collection agency can track down tenants to receive late rental payments. If the tenant refuses to pay, the agency can report this delinquency to all three major credit bureaus: Experian, Equifax, and TransUnion. This can have a significant impact on the tenant’s credit rating and make it more difficult for them to secure future rentals or credit.
- Obtain a Civil Judgment
If other options fail, small landlords can pursue legal action against the delinquent tenant. By obtaining a civil judgment from a court, the judgment becomes part of the public record. As a result, the three major credit bureaus will receive information about the judgment, which will negatively impact the tenant’s credit rating. However, it’s important to have a strong legal team to navigate the process of obtaining a civil judgment.
- Partner with a Tenant Screening Service
Some tenant screening services offer the option of reporting delinquencies to credit bureaus on behalf of landlords. This service may require additional fees or subscriptions, but it can provide a streamlined way for small landlords to report delinquent tenants to credit bureaus without having to go through the credit bureaus directly.
- Utilize Property Management Software
Certain property management software solutions can integrate with credit bureaus, allowing landlords to report delinquencies directly from the software. This option may be more convenient for landlords who already use property management software, as it can streamline the reporting process and eliminate the need for additional services or subscriptions.
Conclusion
Reporting delinquent tenants to the major credit bureaus (Equifax and TransUnion) in Canada is an important tool for landlords to recover unpaid debts and warn other landlords about problem renters. However, landlords must follow proper procedures, including documenting all notices issued, obtaining a formal court judgment against the tenant, and submitting required evidence to the credit bureaus.
For small landlords who cannot report directly, options include using Experian’s RentBureau service, hiring a collection agency, partnering with tenant screening services, or utilizing property management software integrations. While reporting does not guarantee recovering the debt immediately, it motivates tenants to pay to preserve their credit and prevents them from becoming repeated problems for other landlords. Consistently reporting delinquent tenants increases a landlord’s likelihood of eventually getting paid what is owed and deters rental delinquencies by making the consequences visible on a tenant’s credit report for years. Exercising this option is a key part of professionally managing rental properties in Canada.