Now that your rent payment history may affect your credit score, your rental history matters more than ever before.
According to the National Multi Housing Council, 32 percent of Americans are renters. If you’re one of them (and I am), you really should try to be the best tenant you can be.
And not just because it’s the right thing to do. Tenant screening services have gone digital, and landlords can see your rental history with a few clicks. If you’ve been a great tenant, you’ll reap the benefits. But if you have a blemished past, you could face everything from higher rent to lower credit scores.
Let’s look at the pitfalls of being a lousy tenant, and then some tips on how to turn it around.
1. You’ll pay penalties
Say you have a problem paying rent on time. At my last apartment, the landlord charged $50 if you were late and $5 for each day you didn’t pay up. If you’re four days late, that’s an extra $70. Make that a monthly habit and that’s $840 you’ve thrown away.
2. You might lose your place
If you break your lease, your landlord can evict you, leaving you scrambling for a new place to live — and now with a black mark on your rental history. But even if you aren’t evicted, nothing says your landlord has to let you live there once your lease is up. In many locations, it’s up to the landlord — not you — to renew the lease. If you’ve been a problem tenant, he may not roll out the welcome mat for another go-round.
3. The rent just went up
If your landlord does renew the lease, you could see a jump in your rent. Unless you live in a rent-controlled building, your landlord can raise the rent at the end of every lease, and if you’ve been a problem, she doesn’t have any motivation to keep rent low so you’ll stick around.
4. Goodbye, security deposit
Your security deposit is refundable if you’ve been a stellar tenant. If you caused damage, didn’t clean up after your move, or left owing your landlord rent or late fees, he can legally recoup those costs from your security deposit. Instead of getting a check in the mail after you move, you might see an invoice.
5. Hello, lawsuit
If the amount you owe the landlord after your move exceeds your security deposit, you could wind up in court. Under landlord and tenant laws, your landlord has the right to sue you in civil court for damage repair and unpaid fees. If the court decides in your landlord’s favor, it will show up on your rental history, and Experian says it will stay on your credit reports for seven years.
6. Finding a new rental will get harder
All it takes is Internet access and a small fee for any landlord to read up on your rental history. If a landlord sees past problems, he may deny your application altogether, wasting your time and your application fee.
What’s worse: You may not get the apartment you really wanted and have to settle for something else. This could mean a longer commute to work, a crappy apartment or a sketchy neighborhood.
And when you do find an apartment, you might pay more than someone else. Some landlords will approve tenants with a spotty past, but they might charge a higher upfront security deposit or raise the rent.
7. Your credit score could take a hit
It used to be that your rent payment history would show up in your credit reports only if the landlord sent the debt to collections or won a civil suit against you in court. But in 2011 major credit bureau Experian announced that it was including on-time rental payments gleaned from tenant data service Experian RentBureau in its credit reports if a renter opted in for that. The move was widely hailed as a way for people with thin credit files to build better credit scores — in this case, Experian’s VantageScore.
Experian reportedly had planned to begin including late rent payment history in its reports the following year. However, an Experian spokesperson said this week, “We do not incorporate negative rental payments into our scores.” RentBureau has data about more than 9 million tenants and is seeking to increase the number.
Meanwhile, the Chicago Tribune reported last year:
Starting March 1 , certain FICO scores will begin to include rent payment data collected by CoreLogic Credco, a specialty credit reporting agency.
At first, the new scoring will be available only to mortgage lenders, which check your credit score before approving you for a home loan. But, said Joanne Gaskin, director of product management global scoring at FICO, “In the future we hope to offer something similar to credit card companies and other lenders.”
So a rent payment that is more than 30 days late has the potential to hurt your credit score if your landlord reports payment history to a credit bureau or third-party service.
Be a better tenant
How do you avoid all this? Being a stellar tenant really isn’t hard. Here are a few pointers:
- Pay your rent on time. Always pay your rent no later than the due date (or before if you want brownie points). If you’re running late, immediately tell your landlord why and when she can expect payment. Landlords are human; they’ll understand as long as you don’t make a habit of it.
- Follow the lease. Always read the lease before signing. If you see a rule you don’t think you can – or should have to — follow, find another rental or get the landlord to change it in writing. Once you sign the lease, you are legally expected to follow it.
- Don’t make changes. Always get written approval from your landlord before you adopt a pet, let your significant other move in, or make changes to the property.
- Don’t wreck the place. That property is your landlord’s investment.
Karen Datko contributed to this report.