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Apartment security deposit dispute stains renter's credit report

By

Credit Score Report
Reporter Jeremy M. Simon
Jeremy M. Simon is a former staff reporter for CreditCards.com who covered credit reporting and scoring issues.

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Question for the CreditCards.com expert

Dear Credit Score Report,
I moved from my apartment six months ago and was told I owed -- beyond my security deposit -- a fee for damages. The fees were unwarranted. For example, one "cleaning" fee was for a stain on the patio. In the year and a half I lived there, I only went on the patio once. They have now sent this to collections. How do I get this off my credit report, as I feel that charges are not valid? The apartment complex stands behind their charges and will not budge. -- Thomas

Answer for the CreditCards.com expert

Hey Thomas,
If you want to get those apartment fees off your credit report, it will probably take a convincing argument -- either in court or with the collection agency.

You certainly aren't the first renter to deal with an unscrupulous landlord -- nor will you be the last, sadly. I can identify with your plight, since I've had my own troubles recovering security deposits and been hit with repair fees for nonexistent damage. It's not always easy to get fees reversed when it's just your word against the landlord's. What makes your case especially difficult to resolve is that you're no longer dealing directly with the apartment management, but with a collection agency that has purchased your debt and apparently reported your delinquency to the credit bureaus. That's why getting those charges off your credit report will likely require a persuasive argument in court or with the debt collector.    

So where do you begin? First, let potential lenders know about your situation by adding a 100-word statement to your credit reports. "Consumers have a right to add a remark on their credit report to address any particular issue, such as a payment dispute," says Cliff O'Neal, senior director of corporate communications for credit bureau TransUnion. In the statement, explain that you're contesting the charge with the landlord and anticipate that it will be reversed in the future. That statement may not change the way all credit card issuers view you, since their approval process is often largely automated, but it could help when a live human being reviews your application for a home or auto loan.

Then learn what the renters' rights are in your area, since they can vary depending on where you live. "Whether or not the damage fee is valid in the first place may depend on your state," says Joe Ridout, consumer services manager with the nonprofit consumer rights group Consumer Action. He recommends looking at the state-by-state list of landlord and tenant rights available on the website for the Landlord Protection Agency (LPA).

Once you get a handle on your rights, gather any evidence. All too often, landlord disputes become a "he said, she said" type of situation, Ridout says. That means that you'll need real proof to support your claims. This might include photos of the damaged areas, or perhaps a checklist that you filled out when you moved into and out of the apartment.

When all that's finished, it's time to plead your case. You have two main options:

  • Take the landlord to court, if they aren't willing to reverse the charges.
  • Work with the collection agency to reduce the amount of the payment.

If you're convinced that you have a solid case, you can sue the landlord for the return of your security deposit. A successful court outcome should require the removal of that collection account listed on your credit report. 

Otherwise, your best option involves contacting the collection agency directly. As a first step, send the collection agency a certified letter requesting debt validation, which means they must prove the debt is yours and they have the right to collect it. (CreditCards.com has a sample verification letter along with several other debt collection sample letters on its website.)

Assuming they confirm their right to the unpaid fees, Ridout urges you to demand a "pay for deletion" from the collection agency. "Pay for deletion" means the collector agrees to remove those negative items from your credit report once they get paid. You'll need to be assertive: Let them know -- in writing -- that you'll repay a portion of the fees if they agree to delete that item from your credit report. If you have multiple debts, tell the apartment debt collector they need to get in line. Emphasize that you plan to make a payment to the collector that works with you, says Ridout. The collection agency may refuse to do the deletion, claiming they're required to report that delinquency to the credit bureaus. Don't be deterred, though. "There is no requirement that they report anything to the credit reporting agencies," Ridout says.   

So just how much should you pay? "If you're a good negotiator, you can negotiate less -- sometimes considerably less -- than the full value, since the collection agency is buying it for much less than the original value," he says.

Your story should serve a cautionary tale for other renters: Before a lease is signed, experts say, a renter should take plenty of photos of the prospective apartment to document its condition. Then the person should provide copies to the landlord and have him sign a document acknowledging that he reviewed them, says TransUnion's O'Neal. That way, messes like the one you're struggling with now become much less likely. 

Good luck!

--Jeremy 

See related: How to dispute credit report errors, How to add a written statement to your credit report, Debt collection sample letters 

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Published: January 25, 2011


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