ARTICLES
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Can Breaking A Lease Affect Your CreditBy Pierre Mouchette | Real Property Experts LLC
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When you signed a lease for your apartment or home (dwelling unit), you agreed to pay a certain amount of rent by a certain date each month for a specified length of time. As life is unpredictable, circumstances may necessitate the need to get out of the lease earlier than you initially agreed. Some typical reasons are:
Costs of Breaking a Lease
Some leases include a lease-breaking fee that is charged when the tenant terminates their lease before it ends. Depending on the lease terms, you will either be charged a flat lease breaking fee or rent for the remainder of the lease. Refer to your lease or call your landlord to find out what it will cost to break the lease, and the steps to take before breaking it.
Remember, when you move out, you will also be charged for any damages to the unit that are not covered by your security deposit. These charges would be due even if you did not break the lease. Additionally, if you move before your lease ends, the lease may specify that the security deposit is forfeited, even if the unit is left damage-free.
Talk to your landlord! You can avoid hurting your credit by paying any lease-breaking fees in full and giving your landlord the advance notice required by your lease. If you want to avoid paying the lease breaking fee, you may be able to sublease your apartment. Work with your landlord to figure out the best course of action to minimize the cost of breaking your lease and to avoid damage to your credit.
How Lease Breaking Could Hurt Your Credit
You can expect your landlord to take legal action if you move out before your lease ends without resolving your lease breaking and or any other outstanding balance. If your landlord currently reports rent payments to the credit bureaus, they can add the delinquent balance directly to your credit report.
Or your landlord may hire a collection agency to pursue you for the remainder of the lease balance or file a lawsuit in small claims court to obtain a judgment against you. Either a debt collection or judgment can wind up on your credit report and severely damage your credit score.
Once your credit report contains negative entries stemming from breaking your lease, the listing will remain on your credit report for seven years. The negative marks will affect your credit score and your ability to rent another dwelling unit, buy a home or car, get a credit card, or any other action that requires a good credit score.
Legal Reasons for Breaking Your Lease
If you are breaking your lease because your landlord has not fulfilled some part of the contract (lease), e.g. failed to make repairs that affect the habitability of the unit, you may be legally allowed to move without lease breaking penalties. Consult the laws in your state and an attorney to see if you have a legal reason that would allow you to break your lease without having to pay a penalty. Moving for personal reasons typically do not qualify!
- You need to relocate for a job.
- You are buying a house.
- You have fallen on hard times and can no longer afford the rent payments.
Costs of Breaking a Lease
Some leases include a lease-breaking fee that is charged when the tenant terminates their lease before it ends. Depending on the lease terms, you will either be charged a flat lease breaking fee or rent for the remainder of the lease. Refer to your lease or call your landlord to find out what it will cost to break the lease, and the steps to take before breaking it.
Remember, when you move out, you will also be charged for any damages to the unit that are not covered by your security deposit. These charges would be due even if you did not break the lease. Additionally, if you move before your lease ends, the lease may specify that the security deposit is forfeited, even if the unit is left damage-free.
Talk to your landlord! You can avoid hurting your credit by paying any lease-breaking fees in full and giving your landlord the advance notice required by your lease. If you want to avoid paying the lease breaking fee, you may be able to sublease your apartment. Work with your landlord to figure out the best course of action to minimize the cost of breaking your lease and to avoid damage to your credit.
How Lease Breaking Could Hurt Your Credit
You can expect your landlord to take legal action if you move out before your lease ends without resolving your lease breaking and or any other outstanding balance. If your landlord currently reports rent payments to the credit bureaus, they can add the delinquent balance directly to your credit report.
Or your landlord may hire a collection agency to pursue you for the remainder of the lease balance or file a lawsuit in small claims court to obtain a judgment against you. Either a debt collection or judgment can wind up on your credit report and severely damage your credit score.
Once your credit report contains negative entries stemming from breaking your lease, the listing will remain on your credit report for seven years. The negative marks will affect your credit score and your ability to rent another dwelling unit, buy a home or car, get a credit card, or any other action that requires a good credit score.
Legal Reasons for Breaking Your Lease
If you are breaking your lease because your landlord has not fulfilled some part of the contract (lease), e.g. failed to make repairs that affect the habitability of the unit, you may be legally allowed to move without lease breaking penalties. Consult the laws in your state and an attorney to see if you have a legal reason that would allow you to break your lease without having to pay a penalty. Moving for personal reasons typically do not qualify!
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RPE Category (Digital Digest)
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REAL ESTATE | MORTGAGE & LOANS | Credit
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PUBLISHED:
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November 20, 2020
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