Does Breaking A Lease Hurt Your Credit
does breaking a lease hurt your credit. Breaking a lease does not directly affect your credit score. However, some of the consequences of breaking a lease could hurt your credit. For example, unpaid rent or fees could be sent to a collection agency, which will report the debt to the credit bureaus. Also, your former landlord could file a lawsuit to collect the money you owe, which may lead to a note in your public record, making it harder to apply for new credit.
You may need to break a lease for a variety of reasons, like moving in with a partner, changing jobs or finding yourself unable to afford your current living situation. It’s often possible to break a lease early, but you’ll want to be sure to make arrangements with your landlord. If you simply leave and stop paying your rent, you’ll likely face both financial and legal consequences.
Read on to learn more about how breaking a lease could affect your credit as well as how you may be able to break your lease without hurting your credit score.
How breaking a lease could affect your credit
Because landlords typically don’t report to the three credit bureaus—TransUnion®, Experian® and Equifax®—breaking a lease isn’t likely to show up directly on your credit report. However, breaking your lease often involves fees or rent payments, and failing to pay will probably hurt your credit.
Before breaking your lease, make sure to read your lease agreement and consult with your landlord to figure out the best approach for your situation.
If you don’t take care to break your lease properly and pay what you owe, you could face any of the following consequences:
- Any unpaid fees or rent payments could be sent to collections. Once a collection agency reports your unpaid debt, you’ll receive a negative mark on your credit report that is likely to decrease your score.
- Your landlord could sue you for the money you owe. Your former landlord may sue for your unpaid rent or fees. If you’re found responsible and can’t pay, the court may allow the landlord to garnish your wages—that means they’ll have access to a portion of your paycheck before you do. A successful lawsuit may also lead to a note in your public record, making it harder to apply for new credit.
- Future landlords may be less willing to rent to you. Whether or not your credit is directly affected, future landlords may contact your previous landlord and be less willing to rent to you if you broke a lease without fulfilling your financial responsibility. Having a good rental history is an important part of being a responsible tenant and finding future housing.
Overall, it’s important to make sure to pay what you owe when breaking your lease—otherwise your credit score may suffer or you could face serious legal consequences.
That said, it’s definitely possible to break a lease without hurting your credit. Read on for a few suggestions for what to do if you need to leave your living situation before your lease is up.
How to break your lease without hurting your credit
It may be possible to break your lease without hurting your credit score, but it will depend on your contract, the state you live in and your landlord’s willingness to work with you.
If you’re looking to break your lease, keep the following in mind.
Look closely at your lease agreement
Before making any decisions about breaking your lease, make sure to read your lease agreement closely. Your contract may include specific information about how to break your lease—including details like how much you’ll need to pay if you choose to do so.
In many cases, you’ll be responsible for paying some or all of your remaining rent, and in other cases you’ll have to pay a penalty or forfeit your security deposit if you break your lease.
Your lease agreement may not outline the specific steps required to break your lease. In any case, the best next step is to discuss the situation with your landlord.
Discuss with your landlord
Don’t hesitate to let the landlord know that you’re considering breaking your lease. Many landlords will be willing to work with you to find a solution that works for everyone involved.
Some states require landlords to make a good faith effort to find a replacement tenant for you, in which case you may only owe rent for the time that the housing was vacant.
Make sure you clearly explain your situation and understand the paperwork and cost that will be involved in breaking your lease. If you make an agreement with the landlord, make sure to get it in writing and signed by both parties—a spoken agreement isn’t sufficient for this situation.
Find a new tenant or a sublet
Your landlord may be more willing to accept you breaking the lease if you provide a suitable replacement. While some landlords will seek to find a replacement on their own, if you know someone who would be a good fit, that could expedite the process of breaking your lease.
Depending on your contract, you may be allowed to sublet your apartment for the remainder of your lease—that means you’ll find someone to live in the unit and they’ll pay you rent each month. Keep in mind that your lease may not allow subletting, and you’re still ultimately on the hook for the rent.
Make sure to pay any rent or fees you owe
Once you’ve made an agreement with the landlord, you’ll want to make sure to pay any rent or fees you owe. It may be possible to arrange a payment plan, but make sure you have the terms in writing as discussed above.
Failure to pay what you owe for the lease you signed is likely to lead to a variety of financial and legal consequences. If you’re struggling financially, try to work with the landlord to find a solution that works for everyone involved.
No matter what, after you break a lease, you’ll want to check your credit report and credit score to see the effects it had.
Check your credit after breaking a lease
After you’ve broken your lease and paid any associated costs, you’ll want to get a copy of your credit report from each of the three bureaus. Read the reports closely to make sure you don’t have any new or incorrect debts listed that might affect your score. If you want to get your broken lease off your credit history, you’ll need to make sure that you pay off any collection debts associated with unpaid rent or fees.
You’ll also want to check your credit score to make sure you’re still trending toward meeting your financial goals. A higher credit score can help you get better interest rates on loans or credit cards.
If your score has taken a hit and your credit report contains inaccurate information—either related to breaking your lease or anything else—you’ll want to start a dispute. This is an important part of repairing your credit and ensuring your credit history only contains factual information.