Credit reporting for community associations is the wave of the future. As one of the first management companies to offer credit reporting in Arizona, we want to inform you of the benefits of credit reporting and explain why we believe credit reporting is not only the premier financial management option for community associations but will soon be the industry standard:
Homeowners can positively impact their credit by paying on-time. Credit is reported monthly, after a 30-day grace period, for all on-time and delinquent payment statuses for assessments, special assessments, and late fees for all homeowners in the community, effectively encouraging homeowners to pay on-time.
On-time payments are reported free of charge and rewarded with positive points on a homeowner's credit score, resulting in lower mortgage, credit card, and auto loan interest rates for homeowners.
Delinquent payments (payments not made within the 30-day grace period), will have a negative impact on a homeowner's credit score and result in a credit reporting fee being applied to the delinquent homeowner's account.
There are a number of influential, high-profile business leaders and professionals who are of the opinion that no one should pay a recurring bill (whether monthly, quarterly, semi-annually, or annually) without getting credit for doing so. You don't have to take our word for it, though. Below is a video from Mr. Wonderful himself, Kevin O'Leary.
Credit reporting significantly reduces association delinquencies. Sperlonga Data & Analytics (Sperlonga), the national credit reporting business we partner with, has demonstrated results of reducing delinquencies in community associations by an average of 35% and the number of delinquent homeowners by 21%, increasing the liquid assets associations have to operate, complete needed reserve projects and enhancements, etc. This allows associations to better manage and protect their financial health and the property values of the homes in their communities.
Credit reporting is a no-cost service to community associations. Through a proper credit reporting program like the one we have set up with Sperlonga, credit reporting is considered a no-cost service to community associations because all charges incurred for the service are applied to delinquent homeowner accounts. Further, if the cost of credit reporting cannot be recovered due to a bankruptcy or foreclosure, the charges are credited back to the association!
There is almost no risk to community associations for reporting credit. Through a proper credit reporting program like the one we have set up with Sperlonga, risk to community associations is almost nonexistent. This is because all dispute resolution is handled through the reporting business partner's customer service department. Further, the reporting business partner agrees to indemnify and hold harmless both the management company and the association for any Fair Credit Reporting Act (FCRA) concerns.
This automated payment reporting process is easy to set up and manage. We do not need to collect any personal information (Social Security, credit card, or driver's license numbers) to report credit. The credit reporting bureaus have all of the information they need from property records. The credit reporting process is automated through back-end connections between the reporting business partner's software and the Management Company's accounting/management software. As a result, reports of delinquent payments are automatically suspended when homeowners enter into payment plans, file for bankruptcy, or enter foreclosure.
As you can see, there are extensive benefits to credit reporting for community associations. In addition to these benefits, we believe credit reporting is the premier financial management option for community associations because it elevates the importance of community association assessments to the same level of mortgages, auto loans, and credit card payments. Credit reporting does not replace other, more standard collection processes, some of which are dictated by governing documents and State Statutes, but it does act as a compelling and effective collection tool in addition to the standard collection processes. In fact, credit reporting may even allow associations to extend their timeframes for turning delinquent homeowners over to attorneys and/or starting foreclosure proceedings.