6:00 am ET
November 14, 2013 November 14, 2013
Homeowners can wreck or raise their credit depending on how well they manage their mortgage, but what about renters?
Not so long ago, renters only faced credit problems for serious rental offenses and paying their rent on time didn’t help their credit scores, but that has changed in recent years. Now, renters have more to look out for when it comes to their credit histories.
Breaking the Lease
When you sign a lease you’re agreeing to pay the rent in full each month through the remainder of the lease. If you move out early and skip out on the rest of the rent payments, it could come back to haunt you.
“Property managers may send unpaid rent amounts to a collection agency, which then reports the unpaid debt
to a credit reporting company,” said Emily Christiansen, director for Experian RentBureau . Once the collection appears on your credit history, it will stay there for seven years and you’ll see a drop in your credit score.
You could also face a lawsuit if you skip out on the lease or cause large damages to your rental, which could impact your credit score. Once your former landlord files a civil suit against you it becomes a public record, which is included in your credit history.
In the past, paying your rent on time and staying on your lease helped you build a good reputation with landlords but did little to improve your credit score. Experian, one of the big three credit bureaus, changed that for many renters in 2010 when it started recording positive rental history through Experian RentBureau.