Does Not Paying Storage Affect Your Credit?

Not paying storage unit fees can have a negative impact on your credit. While a storage company generally does not report routine monthly payments or initial late payments to credit bureaus, a problem arises if the debt becomes severely delinquent and is sent to a third-party collection agency. The unpaid amount then transforms into a collection account on your credit report, which can lower your credit score and remain visible for years.

How Unpaid Storage Debts Appear on Your Credit Report

An unpaid storage debt affects your credit report when it is transferred to a collection agency. Most storage facilities do not directly report payment history to the major credit bureaus, meaning on-time payments typically do not help build credit, and initial late payments do not immediately harm it. However, once an account is sent to collections, the collection agency can report this new debt to Experian, Equifax, and TransUnion.

This reported item appears as a collection account on your credit file, detailing the original creditor, the collection agency’s name, the amount owed, and the date it was reported. A collection account can cause a drop in your credit score because payment history is a significant factor in credit scoring models. This negative information can remain on your credit report for up to seven years from the date of the original delinquency, even if the debt is eventually settled.

The Process Leading to Credit Reporting

When a storage unit tenant fails to pay rent, the facility follows a process before the debt impacts credit. Initially, a grace period typically applies, often ranging from a few days to two weeks, before late fees are assessed. If the payment remains overdue, the storage facility places a lien on the contents of the unit, which is a legal claim allowing them to seize and sell the property to recover the unpaid rent and associated costs.

Before enforcing this lien, storage facilities send multiple notices to the tenant. These notices include a notice of default, a notice of lien, and an intent to sell the contents, providing the tenant a period, such as 14 to 30 days, to settle the outstanding balance. If the debt is not paid, the facility auctions the unit’s contents.

If the proceeds from the auction do not cover the full amount owed, including accumulated rent, late fees, and auction costs, the remaining balance becomes a “deficiency balance.” This deficiency balance is then turned over to a third-party collection agency, which is the point where the debt impacts the tenant’s credit report.

Addressing Unpaid Storage Debts

Addressing unpaid storage debts can help mitigate negative credit impacts. If you anticipate difficulty making payments, contact the storage facility. Facilities may discuss payment arrangements or solutions before the account is sent to collections.

If the debt is with a collection agency, you have rights under federal law, including the right to request debt validation. Within 30 days of first communication from a collector, send a written request to confirm the debt’s legitimacy and the collector’s right to collect. If the debt is valid, you can negotiate a settlement with the agency. Obtain any agreed-upon terms in writing before payment.

Reviewing your credit reports from all three bureaus helps monitor for any inaccuracies or unexpected collection accounts, which can be disputed with the credit bureaus if incorrect.