How Eviction Can Affect Your Credit Score
Housing is one of the basic necessities of life. However, the price of housing is close to historical highs in many parts of the country. Additionally, wages have remained flat and high-paying jobs are hard to come by. Therefore, more people are worried about eviction than ever before.
An eviction threat can impact many areas of your life. While some of these areas are fairly obvious, one thing people seldom think about is how an eviction can affect your credit score. Some may think that this is a minor concern in the context of eviction, but your credit score is one of the leading metrics landlords use when deciding whether or not to rent to you, how much to charge each month, and what your deposit has to be. We’ve put together some of the basic facts about eviction and how it relates to credit scores so consumers can understand their options.
What is Eviction?
Strictly speaking, an eviction is a legal process a landlord uses to remove a renter from their property. Different states and jurisdictions have different laws and regulations that govern eviction. Some states require longer notices that give tenants time to pay their bills, while other states require a minimal amount of notice. Most states do not allow strategies like changing the locks while you’re not at home, but some states do.
An eviction is best understood as a specific type of lawsuit a landlord brings against a tenant. This understanding forms the basis for eviction laws in any jurisdiction. While different states allow for eviction under different circumstances, all evictions can be broken down into a few basic categories.
Reasons for Eviction
These four categories broadly cover all of the reasons someone could be evicted. It’s important to remember that eviction laws change depending on where you live, so you should consult a lawyer or housing advocate if you’re being threatened with eviction.
Pay or Leave
This form of eviction is the one that most people think of when they think about eviction. In a pay or leave eviction, the landlord is essentially suing a tenant for unpaid rent. When they do this the tenant has a certain number of days to make some kind of minimal payment.
If the tenant is able to make the payment before the deadline then the eviction is stopped. If the tenant cannot or chooses not to pay, then the court can have you removed from the property and issue a judgement against you for rent owed and court fees.
Breaking Lease Terms
Another common cause for eviction is breaking terms in a lease. Sometimes tenants are able to get away with minor infractions. Other times they will establish a verbal contract with their landlord which allows them to modify the terms of the lease. However, absent some agreement with the landlord, doing things in violation of your lease can result in eviction. Examples include smoking inside, keeping forbidden pets on the property, or subletting the property to another tenant.
Landlords are also able to seek eviction for destructive behavior. This is usually defined as creating waste or nuisance. Examples of this sort of violation include creating unsanitary conditions, regularly disturbing neighbors, or destruction of landlord property.
Something many people don’t realize is that this type of eviction can be used against you if you make unapproved improvements to a property. For example, if a tenant replaces an overhead light with a fan and doesn’t seek permission from the landlord first.
Some jurisdictions and areas provide ways for a landlord to kick you out for no reason at all. There are restrictions and requirements for this type of action. For example, you cannot be evicted because of a discriminator reasons, and usually your lease must be month-to-month. In this case, the landlord is choosing not to renew your lease, forcing you to find somewhere else to live.
Eviction and Credit Score
Evictions themselves are not reporting to credit reporting agencies. However, that doesn’t mean your eviction won’t show up on your credit report. Eviction is a court-regulated process. If you are evicted, a court must have ruled against you in the eviction process. Therefore, if a court issues a judgement that you are responsible for some or all of your unpaid rent, then that judgement will appear on your credit report.
The debt you owe from a judgement against you is treated just like any other kind of debt in terms of your credit report. It stays on your credit history for seven years, even if you pay it off. Additionally, the judgement in considered in your debt-to-income ratio, which impacts a lender’s willingness to extend credit to you.
Evictions can also appear on your credit report through public records. Credit reports don’t limit the information they collect to what lenders and creditors send them. They also scour public records and list relevant financial information from those records on your credit report. An eviction is a legal, civil judgement against you, and is entered into public records. These records will appear on your credit report and function the same as a debt you owe because of any other civil judgement. These records stay on your credit history for seven years
Credit Repair and Evictions
Credit repair offers some options when it comes to dealing with evictions on your credit history. Credit repair agencies can request letters of goodwill from your previous landlords to remove judgements, assuming you’ve paid off what you owe.
Additionally, credit repair agencies can help you set up your finances in such a way so as to reduce the impact of an eviction. This includes helping you lower your debt so that you have a better debt to income ratio.
Your credit score is important when it comes to finding housing and gaining employment. If you’ve had to deal with an eviction before, you should talk to a credit repair agency and find out what they can do to help remove the eviction from your credit history. The difference in your score could be the difference between finding a new place to live and struggling for housing.
Emma has been helping people improve their credit scores for the past ten years. Prior to that, she worked as a credit repair specialist and consultant for several large credit repair firms. She got into the credit repair industry after graduating with a degree in Finance before getting her MBA.