Does Defaulting on Rent Affect My Credit?

Late rent payments can damage your credit score.

A tenant defaults on rent by not making rent payments on time, based on the terms of a rental agreement. The way your landlord chooses to handle delinquent rent payments determines whether they hamper your credit rating and whether you will have trouble renting apartments in the future.

Credit Bureaus

The Experian credit-reporting company began including renters’ payment histories in consumer credit reports in January 2011. However, that doesn’t guarantee that your rent payments will affect all of your credit scores, because TransUnion and other nationwide credit bureaus don't include rent payments in their credit reports. Furthermore, not all landlords report tenants' payment histories to Experian, so late rent payments, broken lease agreements and related problems may not appear on your Experian credit report either.

Late Payments

Credit card issuers usually don't report late payments to credit bureaus that are less than 30 days past due. Landlords often consider rent payments delinquent after just five days, according to "CNN Money." Your landlord eventually may decide to use a collection agency or seek a judgment against you in small claims court to collect rent you haven’t paid. The Fair Isaac Corporation handles FICO credit scores and indicates that court judgments and collection accounts related to defaults on rental agreements can be as harmful to your FICO credit rating as delinquent loans and credit card accounts. Late payments and other negative information remain on consumers' credit reports for seven years.

Withholding Rent

Renters could face credit problems for exercising their right to withhold rent when landlords fail to make required repairs or to provide habitable apartments. A landlord could report any withheld rent as a late payment. The Nolo law information website notes that tenants may have trouble trying to get such late payments removed from their credit reports, even if they withheld rent due to a landlord's failure to comply with a rental agreement.

Considerations

Landlords typically contact renters' previous landlords to get information on what type of tenants they were and whether they paid their rent on time. Therefore, previous late rent payments and unpaid rent balances can be exposed, although they may not appear on your credit report. In such cases, Fair Isaac notes that a landlord could reject your rental application, even if you have a high FICO score.

References

• CNN Money: Rent Payments Now Appear on Experian Credit Reports
• Fair Isaac Corporation: Can Accounts That Aren't on my Credit Report Affect my Score?
• Experian: Late Rental Payments are not Typically Reported by Landlords
• Nolo: Rent Payment History on Your Credit Report? What Tenants Need to Know
• US Legal: Landlord Tenant Default Law and Legal Definition