How Do Evictions Affect Your Credit Report?

If you plan to buy a home and have an eviction in your past, you’re likely concerned about how it will affect you when it comes time to purchase a home. Having a solid credit report is essential when you want to get pre-approved for a mortgage, and a blemish on your credit report may be an issue. 

Let’s examine how evictions can affect your credit report, how to get an eviction “removed” from your credit report, and how you can get your credit ready to buy a home.

Are evictions on credit reports?

Many people wonder how to get an eviction removed from their credit report. To that, we have good news: Technically, evictions don’t show up on your credit report. 

If you’ve faced an eviction, you’re not in the clear just yet. While evictions don’t have a spot on your credit report, the collection, accounts, and debts that lead to your eviction do. So it’s not so much about getting an eviction off your report, but clearing the bad credit history that got you there. 

So if you fell behind on your rent, your credit may take a hit, especially if your landlord sent your debts over to a collection agency. Any unpaid debts that follow an eviction, like due rent, may go to a collection agency. This is why it is so important to closely review your credit report from the three main credit bureaus — Experian, Equifax, and TransUnion — once a year (you get a free report from each bureau annually). 

The lender would have to review a separate rental history report through a screening company and some credit bureaus (like Experian’s RentBureau service) to find eviction records. Landlords are more likely to review these reports than lenders.

It depends on how your old landlord handles things, but it’s true that an eviction may significantly impact your credit. For example, if they choose to sell your debt for missed rent payments to a collection agency, you’ll end up with a charge-off and an account in collection on your credit report. If you have a charge-off on your report, it can ding your score by anywhere from 80 to 150 points. If they report past due payments, that will also affect your credit and appear in your report’s payment history section, which makes up 35% of your overall credit score.

The good news is that not all landlords report or sell debts, so double check your credit report to confirm where you stand credit wise. 

Are evictions problematic when buying a house?

Not to be confused with credit reports, eviction reports may affect your rental options, as typically eviction reports remain on your rental history for seven years. Those who rent will face more significant hurdles than those who plan to buy a home. 

To find out whether or not you have an eviction report on your rental history, ask the landlord or leasing company you want to rent from for the name of the tenant screening company that they utilize. Then contact that company to inquire whether or not the eviction will still appear on your record. 

If you want to buy a property, it’s important to note that evictions can show up on background checks, which may make it harder to purchase a home or condo that has a homeowners association that does such checks. If you want to remove an eviction from your background check, you need to jump through many hoops: First, you need to identify the county where the eviction case was filed, as landlords must obtain a civil judgment to have a tenant evicted. Then you should petition to have the record either expunged or sealed. To do this, you may need to pay off the balance you owed in full. 

You may also want to try to negotiate a settlement with your previous landlord in exchange for them contacting the credit bureaus to have the events that lead to the eviction removed from your report. The landlord has no obligation to agree to this deal, but they may find it worth it in exchange for the rent payments you owe them, alongside any other fees incurred. If the landlord agrees, hold them accountable. They need to provide you with copies of the letters they sent to the credit bureaus.

If you don’t come to an agreement with the former landlord, you will need to wait seven years for the negative marks against your credit report to go away. If this fails to happen automatically, write to the credit bureaus that didn’t update your report with proof that it has been seven years since the events took place and that your report needs an update. 

Does it matter what type of loan you want?

If your credit took a hit because of the debts you incurred that led to the eviction, you might need to pursue no credit check or low-credit home loans. FHA loans, VA loans, and USDA loans are examples of reputable home loan options for those who don’t have high credit scores. You can still apply for mortgage loans with conventional lenders, but they’ll likely charge less-favorable interest rates than government-backed lenders will.

These government-backed loans tend to be easier to qualify for if you have a lower credit score, but every lender supported by those loans has its own unique lending standards. Some lenders have rules that an eviction will cause them to deny a loan application, even if they provide government-insured loans such as an FHA loan. 

How can you boost your credit before applying for a mortgage? 

If you plan to apply for mortgage loans soon and feel concerned about the impact your credit report will have on your loan options, there are some steps you can take to improve your credit score and report.

1. Review your credit report

First things first, you have to review your credit report to figure out exactly where you stand credit-wise. There’s a chance there is incorrect information on your report, so you’ll want to dispute any discovered errors as soon as possible, especially if you plan to buy a home soon. To do this, file a dispute with the credit reporting agency that provided the report with errors; you will also need to contact the lender who reported incorrect information to the credit bureau.

2. Improve payment history

Because your payment history is the heaviest weighted element of FICO® (the most popular option for lenders) credit scoring models, try to bring any overdue credit accounts current and then make on-time payments in the future. These actions will have a positive impact on your credit score. 

3. Lower your credit utilization ratio

How much money you owe to creditors compared to how much credit you have available determines your credit utilization ratio. The lower your ratio is, the better. 

It’s recommended you keep your credit utilization ratio below 30%. Pay down any account balances to help keep this rate as low as possible. Opening new credit accounts, such as a credit card, can also help decrease your credit utilization ratio, as you gain more access to credit. 

If you plan to buy a home soon, however, you’ll want to avoid opening new forms of credit. If you’re years away from buying a home, on the other hand, applying for new credit can actually help boost your credit score in the long run. With that in mind, start thinking about improving your credit report today for decisions you’re going to make down the road.