What happens to your credit score when you get evicted?
The consequences of eviction can have a significant impact on your financial stability. You may face unexpected expenses such as moving costs and a new place to live, which could lead to increased credit card debt. Additionally, if the eviction is due to unpaid rent, it will negatively affect your credit score.
CNBC Select explains why an eviction itself should not directly affect your credit score and provides tips on how to monitor and improve it.
What we’ll cover
Can an eviction show up on your credit report?
Although an eviction does not directly affect your credit report, if it results from unpaid rent or mortgage, it may negatively impact your credit score.
If you owe your landlord overdue rent payments and your landlord sells this debt to a collections agency, the agency will pursue you for payment and a record of this may appear on your credit report. Typically, unpaid debts remain on your credit report for approximately seven years following payment.
If you are evicted for non-financial reasons, it will not negatively impact your credit score. However, losing your home may put a strain on your finances, and if your emergency fund is insufficient, you may need to take on additional debt, which could harm your credit score.
How does an eviction affect your credit score?
Your credit score will likely decrease if you are being evicted due to unpaid bills or debts. FICO states that payment history is the most significant factor in determining your credit score, so a large amount of unpaid bills will negatively impact your score. To monitor the extent of the damage, you should closely monitor your credit report.
Accessing your credit report and monitoring your credit score is now effortless with Experian. With a free account, you can view your updated credit report every 30 days and receive alerts for any significant changes, such as new debt accounts or lines of credit.
What should you do if an eviction has negatively impacted your credit score?
To minimize the negative impact on your credit score caused by unpaid rent, it is important to pay off the outstanding amount as soon as possible, allowing the collections account to be closed. It typically takes seven years for a paid-off debt to no longer affect your credit score.
Ignoring rent payments can lead to a balance that your landlord can report to a collections agency, resulting in even more financial strain.
It is advisable to communicate with your landlord promptly and discuss a payment plan or adjustment to prevent eviction and any unpaid balances from being sent to collections. Additionally, you may want to consider working with a credit counseling agency to establish a debt management plan. Begin by researching agencies through the National Federation for Credit Counseling (NFCC) or the Financial Counseling Association of America (FCAA) to ensure you choose a reputable and legitimate agency.
Bottom line
The impact of an eviction on your credit score is typically indirect, as it is the unpaid debt that led to the eviction (or the debt you have to assume when searching for a new home) that harms your credit score, not the eviction itself.
Why trust CNBC Select?
Our goal at CNBC Select is to deliver top-notch service journalism and in-depth consumer advice to our readers, enabling them to make well-informed decisions when it comes to their finances. Each article is the result of thorough reporting by our team of experienced writers and editors, who possess extensive knowledge of credit monitoring products. At CNBC Select, we are committed to maintaining our journalistic standards and ethics, even though we earn a commission from our affiliate partners on many offers and links.
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