An eviction occurs when a tenant cannot pay their landlord. Even if someone does not pay their rent for a month or more, they have legal rights. And as strange as it may sound, an eviction is one of them; it gives tenants a reasonable amount of time to gather their belongings and leave.
Eviction can happen to anyone, and rising inflation rates, coupled with skyrocketing rent prices and stagnant wages, are making it more and more common. If you face eviction, you may be curious whether it goes on your credit report. The good news is that it does not go on your credit report, but if taken further by your landlord can impact your finances and sometimes your credit score. Keep reading to learn more about how eviction can affect you.
The Basics of The Eviction Process
It may be helpful to know a little more about how the eviction process works before you learn more about how it can affect credit scores. Eviction will work differently depending on where you live; each state has different laws. However, the general process is similar. Here are the steps of the legal process for an eviction:
1: The Eviction Notice
When you have unpaid rent, you are breaking your rental agreement. Your landlord will have the right to start the legal process of getting their money and/or removing you from their property. The first step they will take is to start with a pay or quit notice, also called an eviction notice. Once this is sent, you will have a limited amount of days to comply.
2: Court Summons
If you do not repay your landlord in the given amount of time, then they will start the eviction process with the courts. After this, you will be summoned for your eviction judgment.
3: The Civil Judgment
The eviction judgment will settle everything from funds owed to the next required steps. If you cannot pay your owed rent immediately, you may get some time or a repayment plan with the courts.
4: Vacating
The last step of the eviction is going to be vacating the property. Keep in mind that landlords are not allowed to threaten you or intimidate you throughout any part of this process, including when you are leaving.
How Can Eviction Affect Your Credit?
So, eviction will not show up on your credit reports; however, if you do not pay your debt, your landlord can turn to a debt collection agency, and your credit will be impacted. Additionally, suppose you take out any loans to pay rent and end up missing payments or defaulting on the loans. In that case, it can really hurt your credit score. Keep reading for more information on how these processes can happen during or after an eviction.
A Debt Collection Agency and Its Impact
A landlord can turn to a debt collection agency/debt collector if you owe them money. This will mean that your credit reports with all major credit reporting bureaus will show an account in collections. You can check these unpaid debts by getting your free report from each credit bureau, which will also have your free credit score.
So how does having collection accounts affect your credit reports, credit score, and overall financial health? A collection account will significantly hurt your score and stay on your credit report for up to seven years! Bad credit can negatively affect your finances and many aspects of your life.
What Happens if I Take Out Loans for Rent Payments and Then Cannot Pay Them Back?
Many people struggling to pay rent may look to loans for rent assistance. There are all kinds of loan options available for a good credit score or a bad credit score. Options like personal loans, credit cards, easy payday loans, etc., can work. However, let’s say you took out these loans to catch up on your rent payments. That debt will show up on your credit report, and adding any amount of debt can hurt your score. Additionally, suppose you cannot repay the loans or miss any payments. In that case, it can significantly damage your credit scores from all three credit reporting agencies.
Where Will an Eviction Be Recorded?
Although an eviction will not show up on your credit report or be part of your credit history, there will still be a record of it. Your rental history follows you when you apply for a new place to live. If your prospective landlord/leasing company decides to use a tenant screening company or conduct a background check, they will see your eviction record. Not to mention evictions are public record which means anyone can find them if they search for them.
Another way a prospective landlord can find a past eviction report is when they contact a former landlord, usually done as part of the references section with a rental application.
And so, although past evictions will not necessarily appear on your credit, they will be a part of public records and appear on background checks.
How To Avoid Eviction
Eviction can be a huge mess, and if you aren’t there yet, there may be things you can do to work things out with your landlord and get things on track with your lease agreement. Here are some things to consider:
Communicate With Your Landlord/Rental Company
If you have trouble paying rent for the first time or even a second or third time, talking to your landlord will be the best way to proceed. The fact is that an eviction case comes with court costs that your landlord will have to cover, and it can cost around $3,000.
And so, in most cases, a landlord may want to work with their tenants before moving to an eviction process. Let your landlord know immediately when you are having trouble paying rent. In most cases, they may be able to work with you on a payment plan for unpaid debt.
Additionally, many leasing companies accept late rent payments with a fee, which can work as a time extension and be a better solution than missing rent payments altogether.
Downsize if You Know You Cannot Pay Rent
Let’s say that you move into a place, and once the first of the month comes along, you notice that it is tight on your monthly income. In that case, you should consider whether or not that place is the right fit. If you barely make enough money to pay rent, any unexpected monthly expense can mean not having enough money to pay your landlord. Which can lead to eviction. Downsizing, if possible, is an excellent way to live within your means, even if that means living with a roommate.
See if You Qualify for Eviction Prevention Programs (EPP)
There are several government programs in every state that can help moderate to low-income households avoid eviction through assistance programs. Find out more about these programs in your state to see if you qualify for funding.
Borrow Funds
Borrowing money is another way you can avoid eviction. Keep in mind that this works best if you are facing a short-term emergency and need it for one-time rent payment. The last thing you want to do is get stuck in a cycle of playing catch up with loans, rent, bills, etc.
Educate Yourself Before Renting
And finally, before renting a place, it is crucial to financially educate yourself. Other than rent itself, several expenses come with renting that you should know about before signing a lease. Things like utilities, parking, groceries, pet fees, and other fees, etc., may all be a part of your monthly expenses. If you aren’t prepared to take on these costs, then it can lead to the inability to make rent.
Key Takeaways
Eviction itself will not appear on your credit reports from all three credit bureaus. However, if your landlord decides to use a Debt collection agency, it can harm your credit score and finances. The best way to protect yourself from eviction is to talk to your landlord and come up with a payment plan. Before you sign a lease agreement ensure that you have enough income to comfortably pay for your home or apartment!
References:
Avail – How the Eviction Process Works
What Happens to Credit When You Get Evicted
Collections on Your Credit Report – Experian