Eviction — How It Affects Your Credit Score And Ways To Fix It
If your landlord takes legal action against you, either by handing over any unpaid dues to a collection agency or initiating a lawsuit, these actions have the potential to harm your credit score since the information in your credit reports is the basis for your credit scores.
Among the most detrimental items that can appear on your credit report is an account that has been sent to collections. The adverse impact on your credit score can be substantial, and accounts in collections can remain on your credit reports for a period of seven years.
The primary factor that has the most significant impact on your credit score is your payment history, accounting for 35% of your overall credit score. Some newer credit-scoring models may exclude paid collection accounts from their credit-scoring calculations, so settling your debts with your landlord could potentially help enhance your credit scores. Nonetheless, any legal judgment will persist on your credit reports for the same seven-year period and may be reviewed by future lenders and landlords.
What are valid reasons for eviction?
While the criteria for eviction can differ by state, there are several common grounds for eviction:
1. Failing to make rent payments on time
2. Inflicting substantial damage to the property
3. Engaging in behavior that jeopardizes health and safety
4. Breaching lease terms, such as illegal subletting or exceeding the occupancy limit
5. Engaging in illegal activities on the premises, like drug sales
6. Remaining in the property after your lease has expired, known as “holding over”
It’s crucial to understand that eviction is a legal process. Typically, tenants receive written notices, often posted on their front doors, and they should not ignore these notices. Furthermore, tenants should attend all court hearings to present their side of the case.
Does an eviction appear on your credit report?
An actual eviction itself won’t be visible on your credit report, but there are related actions that can be reported to credit bureaus:
1. Collections: If your landlord turns your unpaid dues over to a third-party collection agency, this will be recorded on your credit report.
2. Legal judgment: If your landlord files a civil lawsuit and obtains a judgment against you, this legal action becomes part of the public record and can also appear on your credit report.
What are the potential repercussions of an eviction on your credit report?
If activities related to eviction appear on your credit report, it might be challenging to qualify for loans or secure a new rental property.
For instance, when applying for a mortgage, a collection action on your credit report may raise concerns for lenders. If you have a prior eviction on your record, obtaining a home loan can be more difficult. Additionally, landlords frequently conduct credit checks on prospective tenants. While eviction records aren’t typically found on consumer credit reports, they may be reported to Experian RentBureau, which compiles tenant payment history for tenant screening reporting companies.
Is it possible to repair the damage or remove this information from your credit report?
If your landlord has sent your unpaid debts to a collection agency, paying off those collections can be beneficial. Some newer credit-scoring models will remove the account from your credit reports once the balance is settled. Additionally, it’s advantageous for future lenders to see that you’ve resolved the debt.
Going forward, the most effective way to mitigate credit damage resulting from an eviction is to focus on improving your financial health. Timely bill payments and maintaining low debt levels will gradually boost your credit scores.
Although damaging information can remain on your credit report for seven years, older debts have less impact as more positive information is added to your credit reports.
How to dispute inaccurate eviction details on your credit reports
Obtain a copy of your report from each agency and carefully review the reported information. If you spot inaccuracies, contact the reporting agencies and initiate a dispute. Providing supporting evidence, such as canceled checks to prove payments, can strengthen your case.
If a judge dismisses a civil suit filed by your landlord, you can also petition the credit agencies to remove the information. Obtain court records and follow the specific processes outlined on their respective websites to dispute and potentially remove erroneous information. Similarly, if you believe that collections information is incorrect, you can dispute it with the credit reporting agencies to seek its removal from your report.