How Bad Does an Eviction Hurt Your Credit?

Credit reports and scores serve as a financial snapshot, reflecting an individual’s history of managing debt. These tools are widely used by lenders, landlords, and other entities to assess financial responsibility. Understanding the information contained within these reports is important for navigating financial decisions, from securing a loan to renting a home. Many people wonder how significant life events, such as an eviction, might influence this crucial financial assessment.

How Eviction Information Appears on Credit Reports

An eviction itself does not directly appear on a consumer’s credit report, as credit bureaus do not collect or display eviction filings. The eviction process is a legal action initiated by a landlord to regain possession of a property, resulting in a public court record. This public record, while accessible through background checks, is distinct from the financial data found on a credit report.

The negative impact on a credit report stems from the financial obligations associated with the eviction, rather than the eviction order itself. If a tenant fails to pay rent or causes damages, the landlord may pursue collection of these unpaid amounts. This unpaid debt can then be reported to credit bureaus, leading to derogatory marks on a credit file. The Fair Credit Reporting Act (FCRA) governs how consumer information is reported by credit reporting agencies.

Types of Negative Entries Linked to Eviction

The financial fallout from an eviction can result in two types of negative entries on a credit report: collection accounts and civil judgments. Unpaid rent or damages owed to a landlord might be sold to a third-party collection agency. Once a debt is turned over, the collection agency can report this defaulted debt to the major credit bureaus (Experian, TransUnion, and Equifax), creating a collection account. This indicates a failure to pay a financial obligation and can harm credit standing.

A civil judgment is another negative item. If a landlord takes a tenant to court for unpaid rent or damages and wins the case, a civil judgment is issued. Historically, these public records appeared directly on credit reports. However, since 2017, the three major credit bureaus no longer include civil judgments on credit reports. While civil judgments are no longer reported on credit files, they remain public records and can still be accessed by prospective landlords or lenders through other background checks, influencing future housing or credit approvals.

Severity of Credit Score Impact

Collection accounts and civil judgments are damaging entries that can appear on a credit report. These negative marks signal to lenders and creditors that an individual has failed to meet financial commitments. Payment history is a major factor in credit scoring models, such as FICO and VantageScore, making up a large portion of the score calculation. A single collection account or judgment can lead to a significant decrease in a credit score.

The magnitude of the score drop can vary based on an individual’s starting credit score and the presence of other negative items. A collection account will have a more pronounced effect on someone with a high credit score compared to someone who already has a lower score. The presence of these items makes obtaining new credit, including loans, credit cards, or future rental agreements, more difficult. Lenders may view applicants with these marks as higher risk, leading to denied applications or less favorable terms and higher interest rates if approved.

Timeframe for Eviction-Related Credit Damage

Negative information related to an eviction, such such as collection accounts for unpaid rent or damages, remains on a credit report for a period. Under the Fair Credit Reporting Act (FCRA), collection accounts can stay on a credit report for seven years from the date of the original delinquency. This seven-year period begins from the first missed payment that led to the account going into collection, not from the date the collection agency reports it.

Even if the debt associated with a collection account is paid, the entry remains on the credit report for the seven-year duration. While payment does not remove the entry, a “paid” status is viewed more favorably by lenders than an “unpaid” one. The negative effect of these entries on credit scores lessens as they age.