Canceling an apartment lease doesn’t automatically affect your credit history, but it can be a big negative under certain conditions, such as when you need to get an apartment credit check in the future. When you sign a lease, you’re signing a contract agreeing to pay the agreed-upon amount of rent for a specified period. Breaking that contract can have far-reaching consequences, that in some cases, do come back to hurt your credit score.
Not Automatic, but Possible
You may be unsure if you break a lease, does it it affect your credit? However, landlords typically aren’t members of the credit reporting bureaus, and your monthly payments aren’t reported to the bureaus as a mortgage loan would be. If you fall behind on your rent or skip out a lease before it’s over, it doesn’t automatically affect your credit score as a late loan payment would. However, breaking a lease can trigger events that would attract the attention of the credit bureaus. This holds true even if you give your landlord advance notice that you plan on canceling the lease, since you changing your mind about the property doesn’t void the agreement.
Collection Agency Reports
If you break your lease, your landlord can hire a collections agency to pursue the balance owed. Collections agencies can and do report their accounts to the bureaus. If the account shows up as delinquent on your credit history, that’s going to lower your credit score and be a red flag for prospective future landlords.
Small Claims Court
Your landlord also has the option of suing you in small claims court for the balance of the loan. If you have a signed lease, the law likely will take your landlord’s side as a matter of contract law. That could result in a civil judgment against you. Such a judgment appears on your credit history and stays on your report for seven years, so a rental application credit check would reveal your past– and likewise serves as a warning to future landlords that you may not be a tenant who fulfills the rental agreement.
Know Your Options
If you do find yourself having to cancel a lease, your best course of action is to work with your landlord. Read your lease to see if there’s a provision covering what happens if you break it. Your liability may be limited to a month or two of additional rent payments, or you may be obligated to help find a replacement. If you’re canceling your lease for a specific issue, document the cause with the relevant state authorities, and you may be able to leave without penalty. If you’re in the military and get orders deploying you elsewhere or are called up to active duty, you’ll also likely be able to break your lease without risk to your credit history, but check your state regulations to be sure.
- U.S. News & World Report: Breaking an Apartment Lease -- What You Need to Know
- GO Banking Rates: How Breaking a Lease Can Affect Your Credit
- Georgia Consumer Protection Division. "If I Terminate My Lease Early, Can My Landlord Keep My Security Deposit and Charge Me a Fee?" Accessed April 6, 2020.
- Oregon State Bar. "Fees and Deposits." Accessed April 6, 2020.
- Wisconsin State Legislature. "704.29 Recovery of Rent and Damages by Landlord; Mitigation." Accessed April 6, 2020.
- Realtor.com®. "Beyond the Security Deposit: When Can Your Landlord Sue You for Property Damage?" Accessed April 6, 2020.
- The Judicial Branch of California. "Security Deposits." Accessed April 6, 2020.
- Updater. "Breaking a Lease: Everything to Know." Accessed April 6, 2020.
- New Jersey Department of Community Affairs. "Lease Information Bulletin," Page 3. Accessed April 6, 2020.
- Consumer Financial Protection Bureau. "Could Late Rent Payments or Problems With a Landlord Be in My Credit Report?" Accessed April 6, 2020.
- Experian. "Does Breaking a Lease Affect Your Credit?" Accessed April 6, 2020.
- Experian. "How Long Does It Take for Information to Come Off Your Credit Reports?" Accessed April 6, 2020.
- New Jersey Department of Community Affairs. "Lease Information Bulletin," Page 2. Accessed April 6, 2020.
- Michigan Department of Attorney General. "Other Legal Protections and Rights Provided By State And Federal Law." Accessed Apr. 23, 2020.