Apartment debt is leftover rent that you were unable to pay when leaving an apartment. For example, if you move out of the apartment several months early but forget to cancel the lease’s final months, the months of rent will become apartment debt.
Some people may not realize that they have apartment debt on their credit report until their next apartment denies their application. Apartment debt can hurt your credit score and make it more difficult to get an apartment in the future.
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How Apartment Debt Affects Your Credit
Apartment debt is similar to most other types of debt and will affect your credit score if you accumulate it. Having apartment debt will limit your apartment options in the future and lower your credit score.
Credit reporting agencies treat apartment leases like a 12-month loan paid in one-month increments. If you’re late on a monthly payment, it shows up on your credit report as a delinquent account. Late payments and delinquent accounts can affect up to 35 percent of your credit score.
Landlords will report your payment history to an online service that records your rent history, making your information available to your future landlords.
Some of the most significant ways apartment debt affects your credit score include:
- Lowering your credit score;
- Alerting collection agencies;
- Listing civil suits and judgments.
Because apartment debt shows up on your credit score, it’s essential to regularly check your credit report to ensure you’re not carrying any unnecessary baggage.
Review Your Credit Report
If you’re denied an apartment, the landlord is obligated to tell you why. Ask which credit reporting agency they used and ask for a copy of the report. With the report, you can dispute any errors or negative marks.
The Fair Credit Reporting Act (FCRA) entitles all credit users to an annual free credit report. Each of the three reporting bureaus must provide a free credit report, allowing you to see what each bureau weighs differently.
You can request your free credit report online, by phone, or through mail:
- Online: Visit AnnualCreditReport.com;
- Phone: Call (877) 322-8228;
- Mail: Mail a request form to:
Annual Credit Report Request Service
P.O. Box 105281
Atlanta, GA 30348-5281
Once you’ve checked the report to make sure all the information is correct, it’s time to pay your debt.
Paying Off Apartment Debt
To decrease the negative effects of apartment debt, you should pay off the debt as soon as you can. It would help if you also stayed in contact with your landlord to ensure they are aware of your situation.
You have three options for paying off apartment debt in a timely manner.
Creating a Payment Plan
If you don’t have the finances to pay off the debt, you will need to create a payment plan. Payment plans help you budget your monthly expenses.
Negotiate a plan with your landlord and pay back the agreed amount every month. The payment plan ensures that you send consistent monthly payments that work directly towards paying off your debt. Additionally, by staying in close contact with the landlord, you preserve the relationship, avoid eviction, and prevent civil suits.
Paying All at Once
If you’re able to pay off the debt in one lump sum, you should. By paying off the debt all at once, you avoid damaging your relationship with the landlord further, and you avoid future frustrations related to the debt.
Paying the debt allows you to move on without worrying about how the debt will continue to impact your credit score.
Negotiating a Settlement
Negotiating a settlement shouldn’t be your first choice since it is a messy, complicated process. It also doesn’t preserve your relationship with the landlord, and you run the risk of a civil suit.
You will need to know the statute of limitations on your debt and create your settlement near the deadline. The statute of limitations creates a deadline for the landlord to sue you. If the period passes, you can’t be sued, and the landlord will be more willing to work with your terms.
The rest of the process will include offers and counteroffers as you work out a settlement payment with the landlord. Your final agreement should be in writing.
Repairing Credit Affected by Apartment Debt
Apartment debt will lower your credit score, especially if the debt is sent to collections. Luckily, you can repair a low credit score by doing these five things:
- Watch your credit report to make sure everything is accurate. Dispute any inaccurate claims.
- Set up autopay, so you don’t accidentally miss a payment. Late payments can single-handedly drop a Good credit score to Very Poor.
- Don’t open new cards. Opening new credit cards lowers your credit age and adds hard inquiries to your credit report.
- Avoid new debt. Instead, focus on paying off your current debt and repairing your credit.
- Rent affordable apartments to avoid new apartment debt.
You can repair your credit if you begin practicing good credit habits and avoid spending more than you earn.
Can I Rent if There Is Apartment Debt on My Credit Report?
You can rent an apartment if you have apartment debt on your credit report; however, you will have limited options.
Instead of looking for apartments based on aesthetics or location, you will be limited to apartments that don’t conduct credit checks. Your options include:
- Renting from an individually owned apartment;
- Renting a low-income apartment;
- Renting from a friend or family member.
If your apartment debt is preventing you from being accepted by landlords, you could also consider buying a small home. Even with a bad credit score, you should still qualify for an FHA loan, which can help you buy your first property.
Most potential landlords will conduct a credit and rental history check. To avoid being denied from apartments, work to pay off both your credit card debt and your apartment debt.
Tips for Avoiding Apartment Debt in the Future
Avoiding apartment debt will make renting easier and open more apartment options. Here are three tips that will help you avoid apartment debt in the future.
Find a Rental in Your Budget
Never rent an apartment that is out of your budget. Your rent should cost no more than 30% of your monthly income. If you work full-time at minimum wage ($7.25 an hour), your rent should be less than $348 a month.
Additionally, if you’ve struggled with apartment debt in the past, you should focus on creating a budget for the entire time you’re in the lease. Set aside money each month to ensure that you always have enough for the next month’s rent.
Pay Rent on Time
Always pay your rent on time. Set an alarm on your phone or set up auto payments to ensure that your payments are scheduled for several days before the rent is due. If you pay on time every month, you can avoid apartment debt.
Ask for Assistance When Needed
If you need help, ask for it. There are rent programs for adults with disabilities and there’s assistance for single parents in low-income housing. Adults with disabilities also have access to disability housing programs and other resources to help them pay rent or find living assistance.
No matter your situation, there are programs ready to help when you’re unable to afford rent.
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