How Does an Eviction Affect Your Credit?
Unpack the lasting financial consequences an eviction can have on your credit report and overall financial standing.
An eviction is a legal process initiated by a landlord to remove a tenant from a rental property. This action occurs when a tenant violates lease terms, often due to unpaid rent or other breaches. Such a proceeding can lead to significant financial repercussions. Understanding how an eviction affects an individual’s financial standing, particularly their credit, is important for tenants.
How Evictions Appear on Credit Reports
Evictions are civil court matters, originating in the court system rather than directly with credit bureaus. When a landlord obtains an eviction judgment against a tenant, this court record becomes publicly accessible. Specialized data furnishers and credit bureaus gather these public records, which then appear on an individual’s credit report. This entry signifies a legal finding against the tenant for failing to meet rental obligations.
Beyond the court judgment, any unpaid rent, damages, or fees associated with the eviction can be a separate reporting mechanism. Landlords often pursue these outstanding debts by sending them to third-party collection agencies. Once a debt is placed with a collection agency, that agency reports the collection account to the major credit bureaus, such as Experian, Equifax, and TransUnion. This creates a distinct entry on the credit report, separate from the public record of the judgment, indicating a delinquent financial obligation.
Both eviction judgments and collection accounts related to an eviction can remain on a consumer’s credit report for a significant period. These negative entries stay on the report for up to seven years. The seven-year period begins from the date the eviction judgment was filed or from the date the associated account first became delinquent and was sent to collections. The presence of these records affects an individual’s financial profile.
Credit Score Impact
The appearance of an eviction judgment or a collection account on a credit report can significantly impact an individual’s credit score. Credit scoring models, such as FICO and VantageScore, categorize these events as negative indicators of financial risk. These models assign weight to payment history, and a public record of an eviction judgment directly reflects a failure to meet a financial obligation. This can lead to a decrease in the credit score.
If unpaid rent or damages from an eviction are sent to collections, this further compounds the negative effect on the credit score. Collection accounts are considered derogatory marks, indicating a failure to pay a debt. This impacts the “amounts owed” category within credit scoring models, especially if the collection account is large relative to other debts. The recency of the eviction and the individual’s existing credit profile also influence the exact degree of score reduction, but the impact is significant.
A lower credit score can make it more challenging to access financial products and services. Lenders assess credit scores to determine an applicant’s creditworthiness for loans, credit cards, and other forms of credit. A score lowered by an eviction can result in higher interest rates, less favorable loan terms, or even denial of credit applications. This financial consequence extends beyond housing, affecting broader financial opportunities.
Implications for Future Housing
An eviction record presents a significant obstacle when seeking future rental housing, extending beyond its impact on a numerical credit score. Many landlords and property management companies conduct comprehensive background checks that look for past eviction filings and judgments. These checks utilize specialized tenant screening services that access court records and other databases. The presence of an eviction record is a red flag for potential landlords.
Landlords view an eviction history as an indicator of a tenant’s reliability and willingness to adhere to lease terms. They prioritize this information because it relates to the tenant’s ability to pay rent and maintain the property. Therefore, even if an individual’s credit score has somewhat recovered, the record of an eviction can still lead to denial of a rental application. This makes securing new housing challenging.
The screening process for landlords focuses on tenancy history more than other credit factors. While a good credit score is desirable, an eviction record outweighs other positive aspects of a credit report in a landlord’s decision-making process. Landlords aim to mitigate risk, and an eviction history suggests a higher likelihood of future issues, making it difficult to find housing without additional requirements like a larger security deposit or a co-signer.
Addressing Eviction Information on Your Credit Report
Consumers have rights concerning the accuracy of information reported on their credit reports, including details related to evictions. If an individual believes that eviction-related information on their credit report is inaccurate, incomplete, or outdated, they can dispute it with the credit bureaus. This process involves contacting Experian, Equifax, or TransUnion, either online, by mail, or by phone, and providing details about the inaccuracy. The credit bureau then investigates the claim within 30 days.
During the dispute process, the credit bureau contacts the information furnisher, such as the court or collection agency, to verify the reported data. If the information cannot be verified or is found to be inaccurate, it must be corrected or removed from the credit report. It is important to gather any supporting documentation, such as court dismissal papers or payment receipts, to aid in the dispute. This action only applies to inaccurate information, not valid eviction records.
Even if an eviction record is accurate, consumers can add a brief consumer statement to their credit report. This statement, 100 words or less, provides context or an explanation for the reported item. While it does not remove the negative mark, it can offer a brief explanation for potential creditors or landlords reviewing the report. This option allows individuals to present their side of the story.