An eviction will not appear on your credit report. However, if your rent is severely delinquent, your landlord may turn your account over to a collection agency. That can drop your credit score by 100 points or more.
When an eviction notice is presented, chances are that is how the credit score of the person being evicted is going to be affected – but not because of the credit reporting of the actual eviction.
It’s the landing after floor two you need to worry about. The good news, to the extent there is any good news in an eviction, is that the eviction itself is not going to show up on a credit report. Unfortunately, that’s just about the only positive thing I can say about evictions, and even that comes with several caveats.
By how many points does an eviction drop your credit score?
An eviction is a legal process by which a person is removed from their home, usually for failure to pay either their rent or their mortgage payments. It’s typically the result of a long cycle that has already caused a credit score drop.
Laws vary by state, and evictions from federally financed properties have recently been suspended due to the COVID-19-driven CARES Act. But if an eviction process is initiated that usually means that the tenant was seriously delinquent.
So, even though the eviction itself will not be reported to the major credit bureaus – Equifax, Experian and TransUnion – the causes that led to the delinquency very likely will show up. And depending on where your credit score started, you could find yourself with a loss of 100 points or more. The higher your score is before eviction, the more it and the events that follow will cost you in points.
How an eviction affects your credit
Your landlord has the right to demand payment once you are 30 days past due. (Your mortgage lender can do this and more, but the foreclosure process that can precede eviction is too complicated to deal with in this brief article)
At that point, the landlord can also choose to turn your account over to a collection agency, though most prefer to work with their tenants in the beginning. If you continue to be in arrears, your landlord will have to take you to court to actually evict you. If they are successful, you will have a judgment placed against you for the balance due, which may include court costs.
At that point, you can be forcibly removed. And again, the landlord may turn the collection of those amounts of money over to an outside agency. While most landlords do not report nonpayments to the credit bureaus because of the time and expense involved in doing so, collection agencies can and will.
If that happens, you are again looking at seven years from the date of original delinquency before these items will fall off of your credit report. Your credit report is often included in a “tenant screening report” that also includes any tenant history information that may be available from sources other than the credit bureaus.
How to avoid getting evicted
It is my experience that not paying the rent or mortgage is usually a symptom – not the cause – of larger financial problems. It is almost certain you are having problems paying other bills as well.
For most of us, protecting the roof over our head takes precedence over most other bills. Here are some suggestions for dealing with a shortfall before getting put out of your home:
Establish a bare-bones budget
The National Foundation for Credit Counseling offers free budget help and can point out additional community resources. But sometimes that is not enough. Illness or job loss or a reduction in pay can very quickly escalate to the point where something has to give.
Take your time with medical bills
Delinquent medical bills don’t get reported as past due until they are at least six months old. This is intended to give you time to figure out the bill, possibly negotiate an affordable payment plan or reduction in your bill and deal with any insurance issues, but it can also give you time to resolve any other income or debt-related issues.
Ask your credit card issuer for help
Credit card bills and other unsecured debt (not tied to property) can take three to six months to get to the collection phase, which is when the real damage occurs to your score. You can call the card issuer and ask for a hardship program that may buy you some time. The NFCC can also help here with a debt management plan that reduces payments, fees and interest while rescheduling your debt over a longer period.
All of the above can lead directly to your credit report because missed payments will be reported and start to impact your score negatively. They will stay on your credit report for a very long seven years while dragging your score down for most of that time.
What to do if you are evicted
If the worst happens and you are evicted, there are steps you can take to negate the damage. Once you can pay off the judgment, you should do so. Otherwise, it will be difficult to find another decent place to rent, or you may be asked for a much higher deposit.
That’s because even though the eviction will not be on your credit report, it will still be a public record. Landlords can and do check these records when evaluating future tenants. But if you can pay off the judgment, that may help persuade a future landlord to give you a chance.
Eviction is a process you should avoid if at all possible. Cut your other expenses to the bone, but be sure you can put food on your table and keep a roof over your head. And work on building an emergency fund to help you through tough times as soon as the dust clears. Even a small amount saved regularly will add up and could prove the difference if (and when) life throws you another curveball.
Remember to keep track of your score!