Understanding the Impact of Missed Rent Payments on Your Credit

At O1ne Mortgage, we understand that life can sometimes throw unexpected financial challenges your way. Missing a rent payment can be a stressful experience, and it’s important to know how it might affect your credit score. If you find yourself in this situation, or if you’re worried about becoming delinquent, here’s what you need to know. And remember, for any mortgage service needs, feel free to call us at 213-732-3074.

What Happens if I Miss a Rent Payment?

Typically, lease agreements include penalties for late payments. Depending on your contract, you may have a grace period after your due date to pay the amount owed. However, missing a rent payment means you’re in breach of your lease agreement, and your landlord may choose to evict you. Eviction laws can vary by state, so it’s important to understand your local regulations.

Your landlord could also report the late payment to the credit bureaus. Even if they don’t, it could still damage your credit in other ways. For instance, if the debt is sold to a collection agency, it will likely be reported to the credit bureaus, which can significantly impact your credit score.

Do Late Rent Payments Affect Credit?

While on-time rent payments don’t traditionally help build your credit score, missing a payment can potentially damage it, especially if the payment remains delinquent for a long period:

• Your landlord could report late payments: If your rent goes unpaid for 30 or more days, the landlord or your rent payment service could report the late payment to one or more credit bureaus.
• Your landlord could send the debt to collections: If your landlord can’t collect the debt on their own, they may opt to sell it to a collection agency. The collection agency will typically report the debt to the credit bureaus.

A late payment on your credit report can have a significant negative impact on your credit score. However, a collection account can damage your credit score even more because it indicates that the debt has been past due for a while. In both cases, the negative item can remain on your credit reports for up to seven years.

How to Find Out if Your Rent Is Being Reported

If you’re concerned about how a late rent payment could impact your credit score, or you want to know if your on-time payments are helping your credit, here are some steps you can take:

Review Your Lease Agreement

Read through your lease agreement and look for any clauses that indicate that your landlord may report payments, including missed ones, to the credit reporting agencies. You’ll also want to look for other potential consequences of missing a payment, so you’ll have a better idea of what to expect.

Ask Your Landlord

Reach out to your landlord or property manager and ask about their policy regarding late payments and credit reporting. If you’re working with an individual landlord, it’s less likely that your credit history will come into play. However, if your landlord works with a property management company or rent payment service, that third party may report missed payments.

Check Your Credit Report

If your landlord reports on-time payments, they’re also likely to report late payments. Register with Experian to get a free Experian credit report and review your history for rent payments. You can also get a copy of your TransUnion and Equifax credit reports through AnnualCreditReport.com.

If your on-time rent payments aren’t being reported, consider signing up for Experian Boost® to see if they’re eligible. Experian Boost allows you to add eligible positive rent, utility, and streaming service payments to your Experian credit report to potentially increase your FICO® Score.

The Bottom Line

Unlike mortgage payments, rent payments aren’t always reported to the credit reporting agencies. While this means positive rental history may not be helping improve your credit, a missed rent payment is less likely to damage your credit score. However, there are instances where a late rent payment could hurt your credit, particularly when a landlord has a policy to report late payments or if they sell your debt to a collection agency.

To prevent this from happening, contact your landlord if you can’t make rent and ask about relief options. You can also seek out financial assistance for rent or other necessary expenses. Whether or not your landlord reports late rent payments to the credit bureaus, monitor your credit regularly to better understand how your actions impact your credit score in general.

At O1ne Mortgage, we are here to help you navigate your financial journey. For any mortgage service needs, call us at 213-732-3074. Our team of experts is ready to assist you in finding the best solutions for your financial situation.