In this article, we will discuss how breaking the lease affects your credit and we will break it down into subheadings with a brief description for each.
Costs of Breaking the Lease
Typically, a lease includes a fee for breaking the lease that is charged when the contract is terminated before its expiration. The breaking fee is collected based on the terms of the lease, and it may involve a fixed fee for breaking the lease or paying rent for the remainder of the lease term. Please refer to your lease or contact the property owner to find out the breaking fee and the correct steps to terminate the lease.
When you move out of the property, you will also incur costs for any damages in the apartment that are not covered by the security deposit. You may have to pay these costs even if you do not break the lease. Regarding the security deposit, if you move out before the lease concludes, you may lose your security deposit even if you leave the apartment without any damages.
Please speak to the property owner regarding the application of the security deposit to the breaking fee. You can avoid damaging your credit by paying any breaking fees in full and giving the property owner the required notice as specified in the lease.
Another option to avoid breaking lease fees is to sublet your apartment to someone else. This involves transferring the lease and remaining payments to another person. You may need permission from the property owner before you can sublet the apartment to someone else.
How Breaking the Lease Affects Your Credit
The property owner is likely to take legal action if you move out before the lease expiration without covering the breaking fee or any other outstanding balance. If the property owner is currently reporting rent payments to credit bureaus, they may report the overdue balance directly to the credit bureaus to be included in your credit report.
The property owner may also hire a debt collection agency to pursue you for the remaining rent balance, or they may file a lawsuit in small claims court to obtain a judgment against you. Debt collection can be included in your credit report and can cause significant damage to your credit.
Once your credit report contains negative entries due to breaking the lease, the entry will remain on your credit report for seven years.
Note: Negative marks on your credit report will affect your credit score and your ability to rent another apartment, purchase a home or a car, obtain a credit card, or any other action requiring a good credit score.
Legal Reasons for Breaking the Lease
If you are breaking the lease because the property owner has not fulfilled part of the lease (for example, they have not made repairs affecting the habitability of the apartment), you may have the legal right to move out without incurring penalties for breaking the lease. However, you will need to check local laws to confirm this and have evidence of these events and documented facts according to state laws.
Members of the military may be able to break the lease without penalty under the Servicemembers Civil Relief Act as long as the lease was entered into before active duty service. This includes active-duty members of the Army, Navy, Air Force, Marine Corps, and Coast Guard who are serving in support of the regular armed forces, as well as National Guard and Reserve members called to active duty.
Note: The property owner may be willing to waive the breaking fee if you are relocating for a new job and can provide documentation from the employer.
Consult your state’s laws and an attorney to see if you have a legal reason that allows you to break the lease without having to pay a penalty. Typically, relocations for personal reasons are not qualifying.
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Sources:
– Georgia Consumer Protection Division
– Oregon State Bar
– Wisconsin State Legislature
– Realtor.com®
– The Judicial Branch of California
– Updater
– New Jersey Department of Community Affairs
– Consumer Financial Protection Bureau
– Experian
– Michigan Department of Attorney General
Source: https://www.thebalancemoney.com/will-breaking-my-lease-hurt-my-credit-score-960535
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