Does Paying Rent Late Affect My Credit Score?

Posted by: TheGuarantors on September 9, 2021

Late rent can do more than leave you without a roof over your head — it can also hurt your credit score, which in turn will affect all your future housing opportunities.

The fact is, though, we all have expenses to pay throughout the month, and sometimes our paycheck might arrive late. Fortunately, most rentals have a grace period that allows you to pay your rent late (typically up to five days late) without penalty.

Additionally, you might have an option to pay a late fee depending on the contract with your landlord before a final deadline (sometimes up to 30 days). Most landlords will gladly accept the late fee and won't report you to the credit bureau.

However, your credit score will be affected if you can’t pay your rent for an entire month. And guess what? It only takes a single rent default for your credit score to come crashing down.

So if you've missed rent payments, you'll no doubt be wanting to know how can a late rent credit score affect you and what you can do about it. Read on to find out!

Does paying rent late affect your credit score?

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Federal law dictates that a late payment can only be reported to credit reporting bureaus after 30 days. So, it won’t hurt your credit if you pay before the thirtieth day. However, you might have to pay a late fee.

Unfortunately, paying rent late will be reflected in your credit report If you miss the 30-day deadline. This can have significant consequences for your credit score.

A late rent payment can affect your credit score so much that it can prevent you from getting loans, credit cards, and future housing. If you have any option to avoid a late payment, you should try.

Why can late rent payments affect your credit in the first place?

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Rent payment history, in general, affects around 35% of your overall credit score. So, even a single late rent payment or missed rent payment can significantly impact your credit score — especially if it’s already on the higher side.

According to the data analytics company Fair, Isaac and Company (FICO) and the popular consumer credit-scoring model VantageScore a score in the range of 670-700 is considered good.

It is recommend to keep your score above that. This ensures you have a bit of a buffer in case you hit some bumps in the road financially. And this means that even if you do lose some points, you'll still fall within the “good” category.

If you have a credit score of 780 or higher and default on payment just once, your credit score can dip by 90-110 points.

However, this hit to your credit score isn't permanent. You can rectify the situation by ensuring all subsequent payments are made on time. But unfortunately, it takes seven and a half years for a late rent payment to disappear from your credit score report.

Does paying rent late affect your rental history?

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A copy of your credit history shows up with your rental history. So, this means that your rental history can be packaged with your missed rent payments, late rent payments, and any other infractions. Of course, this is only possible if the landlord reports you to the credit bureau.

Wondering how a negative rental history can affect you? Well, if you have a history of being irresponsible with rent, then it's likely any future landlords will think twice before approving your rental application. Unsurprisingly, landlords prefer tenants who can demonstrate consistent on-time payments over an applicant with even just a single late payment.

This means that, unfortunately, it really doesn’t matter if you had amazing credit up until that point — a single late payment can easily knock you out of the running for future apartments.

But don't despair — a missed rent payment doesn’t mean you won’t be able to rent ever again. Plenty of landlords will overlook bad rental history as long as you can explain what happened. And perhaps provide a guarantor, like a co-signer or a substantial security deposit.

Can a landlord ruin your credit?

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Just because you've missed rent payments, it doesn't mean your landlord will automatically report you to the credit bureau. This is where your relationship with your landlord and the rapport you've built comes into play. For example, if you've been paying on time for years and have been an exceptional tenant, your landlord is more likely to be sympathetic to your circumstances and not report a late payment.

Of course, not all landlords will care what your situation is, especially if you're consistently late on your payments and have built up rent arrears.

There are cases where a landlord might use a rental payment service that may automatically report the late rent or rent defaults to the credit bureau. It's also likely that they're liable to report you if the house is part of a property management company, as they might have various policies on late payment.

We recommend you ask for clarity around the issue of late payment before you sign a lease on a place, especially if you know you're going to have a rough time ahead financially.

Long term consequences of late rent credit score

As mentioned earlier, paying rent late can have terrible consequences as it remains on your credit report for up to seven and a half years. A bad credit score or a late rent credit score can prevent you not only from securing loans or housing but can even impact your ability to land a job.

You may even have to pay a deposit on utilities and pay a higher premium on insurance, which can actually drastically boost your expenses. So really, it has the potential to turn into a vicious cycle and is best avoided in the first place.

Of course, things happen in life, and it doesn’t mean there’s not a solution to this problem.

What can I do if I've paid rent late?

The first thing you need to do is bring your account up to date as soon as possible. The more you put it off, the more the late rent can damage your credit score.

If you’re going through a tough time, your landlord may understand the situation and grant you an extension. You can even try to convince them to remove the black mark from your credit report if you have a good rapport.

However, it goes without saying that the best way to avoid all of these issues is to prioritize rent in the first place. We strongly suggest setting up an automatic bank deposit plan if you tend to be forgetful!