CredHub is a rental payment reporting company that helps property managers reduce delinquent payments and add new revenue. David Haldi is the Founder and President of this company that hopes to help investors get the money they’re owed, while helping residents.
“We kind of have a program where everyone wins,” said Haldi. “The resident wins because they’re finally getting credit for their largest payment: their rent. We have 52 million Americans today that are credit-invisible. So we’ve developed a system that’s very automated that extracts the rental payment data and we deliver it directly to TransUnion, Equifax, and Experian. So it can increase their credit score on average 20-70 points.”
The tech includes a past-due revenue program that encourages people to pay on time. CredHub also chimes in ahead of the collections process. People will want their delinquent payment knocked off their credit score, so they deal with things before a collections agent has to get involved.
(2:30) – Patrick Antrim, CEO of Multifamily Leadership, points out that people view different bills with different priority levels. You’d think having a roof over your head would be your number one focus, but people are more likely to pay their cell phone bills first, since there are real and immediate consequences if you don’t: your phone stops working.
Haldi provides an example of one of his renters who hasn’t paid rent, yet somehow has a brand-new car. With an eviction moratorium, there isn’t much property owners can do. With CredHub, late payment can affect their credit.
(4:00) – Something like this can provide a huge competitive advantage for investors. You’re rewarded by a boosted credit score if you rent with a property that uses CredHub and you pay on time.
“It’s a huge marketing tool,” said Haldi. “We have certain clients that promote in the advertisement that they report your rental payments to the credit bureaus. One of the things they’ve found is that they get a better, qualified tenant who applies. Because if they’re going to game the system, then they’re not going to apply for residency at that property.”
Rent is increasing these days, and your ability to pay should be reflected on your credit score. Haldi says people’s credit score goes up an average of 42 points with CredHub, which is a huge advantage.
(6:30) – It’s good to occasionally test assumptions about standard operating procedure. If you think about why you do things the way you do, the answer shouldn’t be “because that’s how it’s done” – make sure it’s really the best practice.
For state’s that have eviction moratoriums, you can’t report negative impacts for not paying rent. No problem – CredHub can report a “neutral” impact in the meantime, then when the eviction moratorium is lifted, CredHub holds people responsible for not paying. It happens automatically.
“We can back-date up to 7 years of debt, and in order to get it removed, you get to put a forbearance plan in place and they pay you, but we will continue to report that as long as they owe the money,” said Haldi.
Haldi says it’s an easy way to get people’s attention.
“We had a client in Texas recently that had $200,000 in outstanding receivables, bad debt over the last two years. And we reported those who were derogatory. In the first week, they gained another $10,000 just because the residents whose tradeline was affected. They contacted us, we tell them to contract the property – we manage all that information for the property,” said Haldi. He explains, they’re the intermediary for taking the data, but residents need to work out payment with the property owner in order to remedy things.
(10:30) – The Fair Credit Reporting Act creates immunity for the property management company if a debt is owed. If there’s a dispute over whether payment is owed, the responsibility falls to CredHub. The property isn’t liable if something is misreported. The residents can’t file a lawsuit against the property management company, it goes to CredHub – although that hasn’t been an issue.
(12:00) – There’s a lot of misinformation because of the neutral reporting system put in place because of the eviction moratorium. CredHub thinks its data about delinquent payments is a bit more accurate, and that there are lots of late payments that aren’t being recorded nationally.
(13:40) – RentCred provides corrective action months before the 90-day collection initiate for missed rent payments. That’s because RentCred lets property managers choose the day they want to extract the data. There are red flags that can appear before payments appear as delinquent, which lets you step in and help people out (both the property owner and the resident) before things get bad.
For instance, rent is due on the first. It’s considered late on the 5th. It isn’t delinquent until 45 days later, but it takes another 45 days before it’ll go to collections. RentCred can pull data on the 15th of the month to help you take action early.
This helps you hold people responsible. Plus, if something goes to a collections agency, you lose some of the money that you pay to that agency. This encourages people to take action before then, and everyone wins.
CredHub warns people before reporting the missed payment to the credit agencies. It also works directly with people and allows the option to put in notes if residents have expressed they are actively working on getting the payment in.
(19:05) – Experian only lets you report positive information, but TransUnion and Equifax let you put a ding on credit scores. Those collectively are what’s applied to the FICO score.
“Getting into the weeds about it, what really matters is the FICO score, because 90% of all creditors use FICO to understand and individual’s credit profile,” said Haldi. “So the reason we developed this was, great, Experian takes positive-only, it’s tied to some rent-roll sufferers, but they can’t report negative because it’s all automated. That’s where our team comes into play, because we – with the derogatory, the negative, without that, you can’t collect that. So it reduces your cost of collections. The other side of it is getting people to pay on time.”
Haldi says people figure if rent is due on the 1st but isn’t considered late until the 5th, people get in the mindset that they could extend out further – maybe test things out, pay on the 10th. With CredHub, rent is really late on the 2nd of the month.
(21:00) – CredHub’s clients are able to cut delinquency in half. Haldi says that largely comes down to education.
In an example of a CredHub client, they found the client was able to make over $150,000 in profit in a single year using that product.
It also increases the cap rate and the value in the portfolio. You also save a bunch of time and energy by not having to chase down debt.
“It can increase the cap value,” Haldi said, using a specific client as an example. “If this guy was to go and sell, and he took it applied to it a specific building, that’s an easy way to increase cap value.”
(23:30) – CredHub’s most popular program includes All State’s identify theft protection program.
There’s been an increase in identify theft during the pandemic. This policy includes dark web monitoring and identity theft resolution with up to $1 million in coverage.
“That’s been a huge win. The residents love it and it’s portable once they leave,” said Haldi. “We’ve negotiated a great rate to pass it on. If they were able to buy that individually online, that’s $10, so that’s where we’ve passed it on. Property owners get the benefit of those extra dollars.”
(24:45) – A lot of people Haldi talks with thinks CredHub is too good to be true, to the point where they question whether it’s even legal. He argues that rent stabilization is a service.
CredHub’s operators are members of the National Apartments Association and work with lobbyists. Of course, each state has different laws, so CredHub stays on top of that so its clients don’t have to.
(26:30) – CredHub has clients small and large – from 15 units to 100,000.
“We don’t make money until you do. We’re going to report everybody from Day 1, because this allows you to market it to everybody in the portfolio. But we don’t charge the property management company – a twelfth… Within a twelve-month period, we finally have everybody paying for the program. But people who are in month 7, 8, or 9 of a lease renewal, they’ll have seen the benefit already on their credit profile.”
This benefits people who are the main leasers, plus people who co-sign as guarantors.
“At first it’s like, who stole this, why is this on my credit report, and then you start explaining it to them, and they start thanking you.”
(28:50) – If people are trying to eventually qualify for a larger purchase, they might even re-sign with an apartment that uses CredHub when otherwise they would consider leaving. CredHub is such a benefit to them that they re-sign with the same apartment because they want to build up credit so they’ll have a good score down the line.
“There’s not many ways to increase credit scores that quickly,” said Haldi.
35% of a person’s FICO score is passed on payment history. 30% is amounts owed. 15% is credit history length. 10% is pursuit of new credit, and 10% is credit mix.
“When we started this, we did a survey to find out how much somebody would pay. We’d ask at restaurants,” said Haldi. “Some people would say $25. ‘I have no other way to do this!’” CredHub charges just $5.
“Think about the difference in interest rate from a 680 to a 720 credit score. Massive!” said Haldi. “Huge benefits by what we’re able to provide.”