Does Breaking a Lease Impact Your Credit Score?

A 2019 pilot study found that reporting your on-time rent payment could boost your VantageScore by up to 42 points. But if you’re considering breaking your lease, this could also affect your credit score, in the wrong direction.

While an apartment lease isn’t the same as a mortgage — meaning your property management company or landlord won’t be running to the credit bureaus to snitch — it can still cause ripple effects on your future finances.

Whether it’s a landlord mismatch or you’re moving for a job, your best bet is to review your lease and tie up all the loose ends to ensure smooth sailing.

Review your lease first

Breaking a lease often incurs some sort of penalty on the tenant. The section in question called “lease termination” will outline the stipulations of an early release.

It can be the balance on the rent if you leave mid-month, forfeiture of a security deposit or some other fee stipulated in your lease. You may even be on the hook for paying all the rent you would have paid if you had stayed in the apartment.

Things to keep in mind after reviewing your lease:

  • If your lease is unclear about the early termination clause, arm yourself with information about your city and state landlord-tenant laws before your conversation
  • Go over your lease carefully to ensure you can afford it. If you have a good relationship with your landlord, it’s possible they may allow you to apply your security deposit to a lease-breaking penalty.
  • If the fees are substantial, you may want to consider subleasing your apartment. Bring another tenant in to take over your lease (and your rent payments). Check your lease to see if this is a possibility.

Once you have your financials and options together, talk to your property manager about the best solution forward. Schedule the meeting with plenty of time — most leases say 60 days — to give proper notice before moving out.

writing a check

Pay up — on time

Communication is key to keep your credit score unaffected by your lease breaking. When you speak to your landlord about moving out early, pay all agreed upon fees before moving out. If you don’t, your landlord can add a delinquent balance to your credit report through a collections agency or take you to small claims court.

At small claims court, you could face a judgment compelling you to pay what you owe. Such judgments are public record, which means your credit score could be affected and prevent you from renting in the future. Up to 92 percent of small claims court cases are settled before going to trial so prioritize communication with your landlord. If things get worse, try a mediator.

It can impact your future

Even if your credit score isn’t affected due to reporting, your reputation might be.

The next time you look to rent a place, you’ll likely be asked for rental references. Your potential new landlord will seek information from your previous property managers. One bad relationship or late payment could keep you from your dream apartment.

And if your credit score takes a hit due to being sent to collections, it will surely show up in the credit check they’ll run before allowing you to sign a lease.

Few landlords are interested in renting to individuals who don’t pay their debts on-time — not just rent, but cars, loans, etc.

Stay alert

Don’t let a bad landlord sour your future housing options — keep all receipts, payments and email communications in a safe place. Be sure to settle up financially before moving to avoid getting sent to collections and get everything in writing.

When in doubt, invest in a short consultation with an attorney to find out your rights before deciding to move out. You want to remain in good financial standing, especially if you have proof of a bad landlord and avoid a dispute.

Are you justified?

There are, of course, valid reasons a tenant might break a lease. For instance, if you’ve made requests for necessary repairs that affect the apartment’s livability. Even so, be sure to read your lease, compile all communications and check your local landlord-tenant laws.

Poor credit due to unpaid rent or collections not only affects your chances of renting another apartment in the future, it can also stop you from buying a home or getting a credit card. Don’t let it happen to you.

The information contained in this article is for educational purposes only and does not, and is not intended to, constitute legal or financial advice. Readers are encouraged to seek professional financial or legal advice as they may deem it necessary.
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Muriel VegaMuriel Vega is an Atlanta-based journalist and editor who writes mostly about technology and its intersection with food and culture. She’s the managing editor of tech news publication Hypepotamus, and has contributed to The Guardian, Atlanta magazine, The Washington Post, The Atlantic, VICE and more. She spends her time eating her way through Buford Highway and exploring Atlanta's arts scene.

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