You might be one of the many Americans who are worried about making rent or possibly under the threat of being evicted. You also may be wondering how this process can impact your credit scores.
While an eviction itself won’t end up on your credit report, not paying your rent on time can negatively impact your credit scores, at least indirectly. This can happen in a number of difference scenarios. For example, if your landlord takes you to court for unpaid rent or damages to your rental, a court judgment leveled against you can show up on your credit report.
Another instance can be if your landlord sells your unpaid rent debt to a collection agency. This can negatively affect your credit scores as late payments can remain on your credit report for seven years.
Charging your rent on your credit card also can impact your credit, and not for the better. Putting your rent on your credit card can impact your credit utilization ratio, thus impacting your credit score.
Your credit utilization ratio is the total amount of debt you have compared with your amount of available credit. This means if you have a $10,000 credit limit and a $5,000 balance, your credit utilization would be 50%. Generally, it is recommended to keep your credit utilization rate at 30% or lower.
When working toward your financial goals, it’s important to be mindful of how your actions affect your credit scores. Your credit scores are an important factor when it comes to renting, getting a home loan and insurance, buying a car and even possibly applying to a job.
Monitoring your credit scores also is essential when it comes to credit health. Staying on top of your credit scores and monitoring your credit report for changes can bring peace of mind, especially during these difficult times.