How Breaking a Lease Can Affect Your Credit

Posted August 21, 2024

Leasing an apartment or home you are obligated to pay the amount of rent for a specific length of time. There might be a time you need to get out of the lease earlier than you agreed. Perhaps you got sick or layoff and can no longer afford the rent payments.

Getting out of a rental lease before the lease expired can affect your credit score, particularly if you don't pay the remaining rent balance when you move out. Talking to your landlord to break your lease can help you from damaging your credit.

• Breaking a lease can affect your credit in certain circumstances.
• If early termination results in a delinquent balance that is reported to the credit bureaus, your credit can be affected.
• Paying the fees or working with your landlord can help you protect your credit.

Costs of Breaking a Lease

Breaking a lease likely includes a lease-breaking fee that's charged when you terminate your lease before it ends.1 Depending on the terms of your lease, you'll either be charged a flat lease-breaking fee or rent for the remainder of the lease. Talk with your landlord about is there a lease-breaking fee and the proper steps to take for breaking your lease.

When you move out, you’ll also be charged for any damage to the apartment that isn’t covered by your security deposit. These charges would be due even if you didn't break your lease. About security deposit, if you move before your lease ends, you may lose your security deposit, even if you leave the apartment damage-free.

How Lease-Breaking Could Hurt Your Credit

Your landlord to take legal action if you move out before your lease ends without taking care of your lease-breaking fee or any other remaining balance you owe. If your landlord currently reports rent payments to all three credit bureaus, they can report the delinquent balance directly to the credit bureaus to be included in your credit report.

Your landlord might also report to a collection agency to go after you for the remainder of the balance or file a lawsuit in small claims court to obtain a judgment against you. The debt collection could wind up on your credit report and severely damage your credit score.

Once your credit report contains negative entries from breaking your lease, the listing will remain on your credit report for seven years.

Negative marks on your credit report will affect your credit score and you won’t be able to rent another apartment, buy a home or car, get a credit card, or any other action that requires a good credit score.

Legitimate Reasons for Breaking Your Lease

If you're breaking your lease because your landlord has not completed some part of the contract (e.g., failed to make repairs that is not suitable to live in), you may be legally to move without lease-breaking penalties. Check your state laws to confirm and have the evidence and facts documented and in forms by the laws in the state you reside in.