New credit reporting requirements under Civil Code Section 1954.07, when tenants elect to have on-time rent payments reported to at least one credit reporting agency 

We have fielded questions on how to implement these new requirements going into effect on April 1, 2025. Let’s give an overview of the law before naming some vendors that can be a conduit between landlords and credit bureaus.

One of our clients quipped that with all of the notices required to serve tenants, they should place a bookshelf in the rental unit for their renters to have easy access. Large landlords can add another notice on that bookshelf, namely a mandatory offer of positive credit reporting.

The public policy behind this, of course, is to give tenants in certain buildings the opportunity to boost their credit scores by having their housing provider make a notation that a timely rent payment was made.

This public policy may backfire in many cases because the cloth cuts both ways. If a tenant opts to have their timely rent payments reported to the credit bureaus, it follows that their untimely, missed rent payments can also be reported. In other words, the stated goal of elevating a renter’s credit standing, ironically, may tarnish their score when life happens and rent isn’t paid on time.

Before we delve into the law's implementation, let’s review what the law is, beginning with who it applies to. Rest assured, it will not affect small, mom-and-pop landlords.

 

Owners of property with 15 or fewer dwelling units are exempt unless both apply:

  1. Landlord owns more than one residential rental building.

  2. Landlord is a real estate investment trust, a corporation, or a limited liability company with at least one corporate member.

Assisted housing developments, as defined in Section 65863.10 of the Government Code, are also exempt.

 

Mom and Pop landlords do not need to read on. But for larger operators or sophisticated investors, please do. 

The onus is on housing providers to provide tenants the option to have their positive rental payment information reported to at least one nationwide consumer reporting agency. 

 

Mandatory Offer to Tenants

Landlords must offer tenants the option to have their positive rental payment information reported to at least one nationwide consumer reporting agency, but when?

We’ll need to put a finger on when the tenancy started.

  • For leases consummated on or after April 1, 2025, the offer must be made at the time of the lease agreement and at least once annually thereafter.

  • For existing leases as of January 1, 2025, the offer must be made no later than April 1, 2025, and at least once annually thereafter.

Requisite notices can be sent via email to the tenant but if the landlord elects to mail the notice, a self-addressed stamped envelope must be included.

 

Key provisions

  • Participation in positive credit reporting is optional and the tenant may opt in at any time after receiving the offer.

  • Tenants who have elected to have their rental payments reported can subsequently request in writing to stop the reporting. After opting out, tenants cannot elect positive rental payment information reporting again for at least six months from the date of the opt-out request.

  • Landlords may charge a fee for this service, not exceeding the lesser of the actual cost to provide the service or ten dollars ($10) per month. If the landlord incurs no actual cost, no fee can be charged.

Vendors that report information

Now that a tenant has chosen to have their timely rent payments reported and we’ve complied with the law, the question is how to report it.

Many large housing providers already utilize property management software that has the capability to report rent payments. Our favorite is AppFollio. We’ve reached out to TransUnion and they provided a handful of approved vendors that report to all three credit bureaus:

  • Esusu

  • RentLinx

  • Rental Kharma

  • CredHub

  • HelloTill

  • PaymentReports

  • Pinata

Our thoughts on these new requirements

Years ago, there was a movement to have on-time rent payments reported to the bureaus to boost the credit of low-income tenants to give them an upward trajectory in life and so a law was passed to accomplish this goal. Fast forward to today and it has been expanded to the masses. All in all, we think this is good policy.

We never like new procedural requirements and the added administrative costs that go with them, but there may be bright sides to this new law. Those tenants looking to elevate their credit and self-select into reporting a positive rental history are probably likely to pay rent on time.

It’s analogous to tenants who have renters insurance; having these policies is indicative that the tenant is responsible and generally cares about the condition of the premises.

Another potential benefit is identifying a spotty rental history. For instance, the tenant has been making timely payments for six months as reflected on their credit report. All of a sudden, this history falls off a cliff and there is no positive credit reporting anymore. It raises the question why?

This would be a red flag to look further into. In California, many court evictions are masked, leaving landlords in the blind in terms of rental risks. Yet under the new law, housing providers can forensically determine when positive credit reports began and ended, giving them further opportunity to inquire about gaps.

Whenever there is a new regulatory regime, it engenders questions and of course, Bornstein Law is glad to answer them.