What Happens to Your Credit Score If You Get Evicted?
If you lease a property and violate the terms of your agreement, your landlord may try to evict you. Aside from leaving you with no place to live, such an eviction can seriously damage your credit score, which can make it harder to eventually secure that mortgage or even get a credit card.
Though an eviction itself doesn’t get reported to the credit reporting bureaus (TransUnion, Experian and Equifax), the fallout from an eviction could be. For example, if your landlord sells your debt to a third-party collection agency or files a civil lawsuit against you, those actions would likely appear on your credit report.
Credit scores are key to securing new loans, jobs and even rental properties, so anything that might negatively affect your report is cause for concern.
What are legitimate reasons you can get evicted?
While rules on eviction can vary by state, there are several common reasons for eviction:
- Failure to pay rent on time
- Substantial damage to the property
- Behavior that endangers health and safety
- Violation of lease terms (such as illegal subletting or too many occupants)
- Illegal behavior on the premises (such as selling drugs)
- “Holding over” or remaining in the property after your lease has expired
It is important to note that eviction is a legal process. Your landlord doesn’t have the right to tell you to vacate the premises on their own terms. You typically have to be notified in writing, which many landlords do by posting a notice on a tenant’s front door. State attorneys say tenants should not ignore these notices, and they should appear at all court dates to argue their side.
Does an eviction show up on your credit report?
While an actual eviction won’t show up on your credit report, there are related actions that can be reported to the credit bureaus:
- Collections: If your landlord sends your account to a third-party collection agency to recoup some of the outstanding money, that will appear on your report.
- Legal judgment: If your landlord files a civil lawsuit and wins a judgment against you, that legal action is part of the public record and can also appear on your credit report.
What effect will eviction have on your credit score?
If your landlord takes action against you, either sending your outstanding payments to collections or filing a lawsuit, those actions related to an eviction could damage your credit score.
If the disputed amount goes to a third-party collection agency, “that is one of the worst things that can show up on your credit report with negative consequences,” said Bruce McClary, vice president of communications and marketing for the National Foundation for Credit Counseling. “It can send your score into the basement.”
What’s the potential fallout from an eviction on your credit report?
If eviction-related activity appears on your credit report, you could have trouble qualifying for loans or renting another property. For instance, if you apply for a mortgage and a collections action appears on your report, “that’s a red flag,” said Corey Vandenberg, a mortgage consultant with Platinum Home Mortgage, who reviews credit reports as part of the mortgage application process. “There can be problems obtaining a home loan if you’ve had an eviction and there’s a collection hanging out there.”
Landlords often run credit checks on prospective tenants. If they see a judgment or collections action on a credit report, they may pass on a renter.
Can you repair the damage or remove the information from your credit report?
The best way to repair credit damage from an eviction is to tune up your financial health, McClary said. By paying your bills on time and keeping your debt low, your score will eventually start to improve, he noted. While damaging information can stay on your credit report for seven years, debts carry less weight the older they get. “The best thing to do is get back on track financially, pay your bills and keep your credit usage low,” McClary said.
You may choose to seek help from a nonprofit credit counseling agency, which can help you organize a budget to start repairing your credit health. Another option is a for-profit credit repair agency, but McClary said consumers should be on the lookout for scams when considering such firms. “If they promise too much, it is probably too good to be true,” he said. To find a reputable credit repair agency, McClary suggested consumers get a referral from a trusted friend, family member or co-worker.
You can dispute the information on your report with the credit reporting agencies
If you feel that eviction-related information has been incorrectly reported to the credit reporting agencies, you can file a dispute with the three firms. You should get a copy of your report from each agency and look carefully to make sure everything is correct, McClary advised. If you see inaccuracies, contact the reporting agencies and start a dispute.
If a judge dismisses a civil suit brought by your landlord, you can petition the credit agencies to remove the information. You’ll need to get copies of court records and submit them to each agency per their process, which you can find on their respective websites.
Likewise, if you believe the collections information is incorrect, you can dispute it with the credit reporting agencies to have it removed from your report.
The bottom line
As a tenant, your rights and eviction procedures will vary by state and city, so it is important to understand the local laws. In Massachusetts, for instance, landlords have to provide 14 days written notice before initiating eviction proceedings due to unpaid rent, but in Montana, that notification period is just three days.
No matter where you live, credit advisors say tenants should never ignore an eviction notice. Failure to respond or resolve an issue with a landlord could cause years of financial hardship.
It can also help to be proactive and communicate with your landlord before you get behind on rent, said Chase Peckham, community outreach director for the San Diego Financial Literacy Center. In cases of job loss or debt from unforeseen circumstances, like a medical issue, he advises clients to communicate with their landlord and try to negotiate a compromise.
“Maybe you can pay half of your rent for a few months until you get back on track,” he said. “It is best to be honest with people that you owe money to. There will be a lot less headaches if you’re not dealing with collections.”