Change Presents Risk to Landlords and Property Managers -

(Newswire.net — July 23, 2017) Flower Mound, TEXAS — In a world where credit reports have historically been a key factor in determining whether a potential renter is a good risk, new changes will present serious risks to landlords and property owners.

On July 1, 2017, a new credit report policy change went into effect that can greatly present serious risks to landlords and property owners. This change is part of the National Consumer Assistance Plan (NCAP) and will be implemented by Experian, Equifax, and TransUnion. This change affects how Public Record data is reported by the credit bureaus. Or more importantly, what will no longer be included.

Credit bureaus will no longer collect or report tax lien data or civil judgements on public records. This has the potential to cause significant problems for anyone who uses credit reports to evaluate risk. A change like this prohibits mortgage lenders and landlords from having pertinent information for the assessment and evaluation of possible customers.

This article will explain why the changes have been made, what it affects and alternatives for continuing to access the crucial data needed to make the most important leasing decisions.

What Information Will be Missing?

Tax liens and civil judgements play a crucial role when it comes to determining the eligibility for individuals applying for a mortgage or a lease. If a mortgage lender or landlord pulls a record that shows a history of civil judgements or tax liens then this raises a red flag. These situations can be quite serious and often speak to the credibility and reliability of the applicant. A civil judgement is ordered by the court in the event of a legal dispute. Some of the most common civil judgements are for evictions that resulted in monetary damage. A tax lien is levied against homeowners who don’t make tax payments on time.

Damon McCall, Founder of ApproveShield^TM explains, “This essentially means a landlord or property manager will no longer have the data they need to make good decisions, which can easily result in loses due to evictions and other expenses. The ability to quickly know who is a high risk has been removed from the credit reporting system.”

Tax liens and civil judgements can highlight the inability of the resident to follow through with the necessary payments. Many mortgage lenders and landlords will deny applicants who show these serious red flags on their credit reports. These applicants are typically denied in an effort to protect the mortgage lender or landlord.

Approving these applicants is very risky for landlords and mortgage lenders alike. Previously, any civil judgements or tax liens lingered on credit reports for quite some time. This allowed lenders and landlords to protect themselves against risk. Many companies don’t want to gamble with applicants who have a shady past when it comes to renting or owning their home. They don’t want to lose money, understandably so.

So What Has Changed?

A public record data must now meet minimum standards and service levels to appear on consumer credit reports. Data must now include the name, address, birth date, and/or the social security number of the consumer. In addition, updated public records from the courthouse must occur every 90 days at a minimum. These new requirements will result in a significant amount of information getting dropped from credit reports.

McCall adds, “The previous data will simply disappear, yet the average property owner or manager will have no idea. This presents a serious risk but most people in the industry won’t know until it is too late.”

Experian® Senior Vice President, Client Operations Sandy Anderson at Experian confirmed much of the data previously available will be going away. Anderson said in a letter dated June 24, 2016, “We anticipate significant change to civil judgment public record data as preliminary analysis shows approximately 96% of this data may not meet the enhanced PII requirements. It is very likely that civil judgment public record data will not be part of Experian’s core consumer credit database after July 2017.” This means that applicant eviction searches will no longer be available through previous methods.

Lack of Data Falsely Increases Consumer Scores

If applicant eviction searches are no longer available on consumer credit reports then scores will be inflated without this pertinent information. Property managers and mortgage lenders rely on this information. Without eviction and tax lien information on credit reports, they face additional risk with the inability to get the most accurate information. In addition, consumer credit reports that lack this information show an artificially high credit score.

An internal study by LexisNexis Risk Solutions indicates that “borrowers with a civil judgment or a tax lien are 5.5 times more likely to end up in serious default or foreclosure.” Property managers and owners know that default often leads to bad debt and evictions, which are expensive. The costs add up quickly. In Texas, there were 225,000 eviction cases filed from September 2014 to August 2015, resulting in 69,000 judgements and over $55 million in lost rent (see sidebar). Where did those 69,000 people move? Without the proper data, no one would know.

Is there an Alternative to Continue Receiving the Data?

Yes, mortgage lenders and landlords will still have access to this data to protect themselves. They will simply need to do it in another way. Companies like ApproveShield^TM, a third-party supplier, will become the new primary provider of all civil judgement, eviction, and tax lien information. They are a credit reporting agency with a database to help mortgage lenders and landlords minimize their risk. These companies provide information about these important key factors.

McCall adds, “In many ways, companies like ApproveShield^TM are better than the previous system through the credit reporting agencies. Simply because they are able to provide more current information than what was possible through the credit bureaus.” The companies accomplish this by discovering evictions filed on potential records very quickly. In many cases, they have the details the day after the eviction is filed. Credit reports could take 30-45 days to report this information.

McCall claims that the additional step to go through a third-party company like ApproveShield^TM is well worth the investment. “I have been in this business a long time. This data is so important to the leasing process, the extra step is simply a must. Just one eviction can pay for the small investment.”

These third-party suppliers can continue providing the data that mortgage lenders and landlords need as crucial piece to their risk management policies. It allows them to reduce risk significantly and protect their company. This means less losses due to tax liens, civil judgements and evictions. Find a 3rd party supplier like ApproveShield^TM and get a complete history of each applicant. It may just save you a bundle!

For questions about ApproveShield^TM or to contact Damon McCall, visit their website or call 972.559.4730.