It can happen to anyone. A financial crisis hits out of the blue. Maybe you’ve lost your job, and suddenly it’s the first of the month and you’re looking at a pile of bills. You sort through them, trying to figure out which ones you absolutely must pay.
Which will take a bite out of your credit score if you can’t scrape the money together? Credit cards and other loans obviously fall into this category. But what about your rent? It depends.
If your landlord reports to any of the credit agencies that you did not pay your rent, then it can harm your credit score. The same is the case if your landlord gets a judgment against you or turns you over to a collection agency.
Your Credit Score
You have several credit scores, and one of three methods or "models" can be used to calculate them: FICO, VantageScore or Experian’s® PLUS Score. Then there’s the added complication that each agency assigns its own score to your credit report based on what’s included in that particular report. The information might not be the same across the board. One of your lenders might report to Experian but not to TransUnion®, so these two scores could differ.
For the most part, however, credit scores are based on similar information – your payment record, how long you’ve been borrowing, how many times you’ve applied for new credit recently, how much you owe overall, how much available credit you have left and the types of credit accounts you have open.
The Effect of Your Rent History
Not paying your rent can only affect these credit scores if your landlord reports the delinquency to one or more of the credit agencies, and most don’t. If your landlord does not report, it’s unlikely that the agencies would be aware of it. Until somewhat recently, it didn’t necessarily mean that the information would be used to calculate your credit score even if your rent payments were to be reported to a credit agency.
That’s beginning to change, however. The most recent FICO model, FICO 9, does indeed include rent payments in credit score calculations, assuming your landlord reports. VantageScore also includes rent history in its score calculations. Experian began doing so in 2010, but only if the payment activity is positive and only if your landlord is signed up with Experian's RentBureau service.
If Your Landlord Sues You
The worst case scenario is that you can’t pay your rent for an extended period of time. If your landlord files a civil lawsuit and gets a judgment against you for the amount of your unpaid rent payments and other fees, this type of activity will almost certainly appear on your credit report. It can also lower your credit score. It’s a matter of public record, and credit reporting agencies routinely collect this type of publicly available information and use it when they’re calculating scores.
Even if your landlord doesn’t file a lawsuit against you, it’s possible that he might turn the debt over to a collection agency. The collection agency – not your landlord personally – could report your delinquency to the credit agencies.
Tenant Screening Reports
You might not escape entirely unscathed even if your landlord or property management company doesn’t report to the credit agencies. Your credit score itself might remain unchanged, but that’s not to say that the information won’t be available to a potential landlord the next time you apply for a rental. Your landlord can also report the information to a tenant screening service.
What You Can Do
You can order your rental history through Experian’s RentBureau service to find out if your landlord is reporting to that particular credit agency. If you want your rent payments included in your score, you can sign up with RentBureau yourself and make your payments through this third party.
If You Miss a Payment
What if you’re late with rent because of an action taken (or not taken) by your landlord? Maybe she’s been grossly negligent with repairs or maintaining habitability of your premises, and your state gives you the right to withhold your rent in these circumstances according to certain rules. So you don’t pay, and your landlord reports it.
You might not be defenseless. Document the problem, including any applicable photos, and send the information to the credit reporting agencies. Your explanation will at least appear on your credit report, which lenders almost always access in addition to your credit score.