How Long Does a Broken Lease Stay on Your Credit Report?
Understand the journey of a broken lease on your credit history, its duration, and how to navigate its consequences.
A broken lease agreement can introduce unexpected challenges to an individual’s financial standing. This event involves ending a rental contract before its stipulated term, often resulting in financial obligations to the landlord. This article explores how a broken lease can appear on a credit report, how long such entries remain, and their broader implications.
Understanding Credit Reporting for Rental Agreements
Landlords generally do not report routine rental payments or lease breaches directly to major credit bureaus. A lease termination itself does not automatically appear on a credit report. However, the financial consequences of a broken lease, such as unpaid rent or damages, can impact one’s credit.
Unpaid balances from a broken lease frequently appear on a credit report when the debt is sent to a collection agency. Landlords may enlist these agencies to recover outstanding amounts, and collection agencies routinely report delinquent accounts to credit bureaus like Equifax, Experian, and TransUnion. If a landlord pursues legal action for unpaid rent or damages and obtains a civil judgment against a former tenant, this court record can become publicly available. While an eviction itself may not directly appear on a credit report, related civil judgments or collection accounts will.
Credit Report Duration for Rental-Related Debt
Most negative information stemming from a broken lease, including collection accounts and civil judgments, remains on a credit report for up to seven years. This timeframe begins from the date of the original delinquency, which is typically the first missed payment that led to the debt. Even if the debt is subsequently paid, the collection account or judgment entry remains on the report for the full seven-year duration, though its status may change to “paid” or “settled.”
For collection accounts, the seven-year period runs from the date of the initial missed payment, not from when the debt was assigned to collections. Public records like civil judgments related to evictions are reported for up to seven years from the filing date.
Impact on Credit and Future Housing
The presence of collection accounts or civil judgments related to a broken lease can lower credit scores. Payment history accounts for a substantial portion of credit scoring models, and delinquent accounts or collections are negative marks. Although the impact may lessen over time, these entries can affect credit scores for their entire reporting duration.
Beyond credit scores, a broken lease can complicate future housing applications. Landlords and property management companies conduct credit checks and tenant background screenings, which can reveal collection accounts for unpaid rent or eviction records. This negative rental history is a concern for prospective landlords and can lead to denial of new rental applications, making it more challenging to secure housing. These negative marks can also influence other financial opportunities, affecting interest rates on loans or certain employment opportunities that involve credit checks.
Reviewing and Addressing Credit Report Entries
Individuals can obtain a free copy of their credit report weekly from each of the three major credit bureaus—Equifax, Experian, and TransUnion—through AnnualCreditReport.com. Reviewing these reports allows for identification of entries related to a broken lease, such as collection accounts or public records, along with details like the creditor, balance, and dates. Compare information across all three reports to ensure accuracy and consistency.
If inaccuracies are found, such as incorrect amounts, debts not belonging to the individual, or paid debts still showing as unpaid, these can be disputed. The dispute process involves contacting the credit bureau that listed the error, either online, by mail, or by phone. The credit bureau is required to investigate the dispute within a set timeframe, usually 30 days. When disputing, provide supporting documentation and clearly explain why the information is inaccurate.
For valid debts, contacting the collection agency or original landlord to arrange payment is an option. While paying off a debt does not remove the negative entry from the credit report before the seven-year mark, it changes the status to “paid” or “settled,” which is viewed more favorably by lenders and landlords. The concept of a “pay-for-delete” request, where a collection agency agrees to remove an entry in exchange for payment, is sometimes explored, but these arrangements are not guaranteed and are often discouraged by credit reporting agencies as they require accurate reporting of information.