6 Min to Read

Will Your Credit Score be Affected if You Break Your NYC Apartment Lease?

Rachel McCray

Rachel McCray

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People break leases for all kinds of reasons, whether it's because of financial problems, relocating to another city, caring for a sick relative, moving in with a significant other, going back to school, etc.

Unfortunately, the consequences of breaking a lease can be very damaging.

It is ultimately up to your landlord whether to pursue eviction or legal action.

Depending on your reasoning, your landlord may be sympathetic and not penalize you; however, that is not always the case.

If your landlord hands your unpaid debt or your remaining month’s rent over to a collections agency, they will more than likely report you to the credit bureaus as a tactic to get you to pay.

You will be considered riskier than other borrowers which will make it difficult to borrow money, making your options very limited in the immediate future.

How Will It Affect My Credit Score?

Because all judgments are entered into public record, breaking a lease can trigger a mark on your credit score lowering it up to 50 points, according to Bankrate.

If this course of action is taken, judgments, evictions, and unpaid fees will negatively impact your credit score making it more difficult to find a new apartment, get a loan or obtain a credit card.

Depending on the FICO model used to pull up your credit, your actions may cause your credit more damage or less.

What is a FICO Score?

A FICO Score is the most widely used credit score by lenders.

Over 90% of lenders are highly dependent on this score to understand and check your credit risk.

The score is made up of the following five factors:

  1. Payment history = 35%
  2. Amounts owed = 30%
  3. Length of credit history = 15%
  4. New credit = 10%
  5. Credit mix = 10%

More accurately, it is a number that predicts the likelihood that you will pay back a loan in a timely fashion.

The number is calculated based on your credit reports with three credit bureaus – Equifax, Experian and TransUnion.

When your data changes at these credit bureaus, the credit can also change.

They do not determine credit approval or interest rate. That credit-granting decision is up to the lender, though it does, however, help them in making that decision.

The scores range anywhere from 300 to 850.

FICO uses theses five credit ranges to rate you:

  1. Exceptional = 800+
  2. Very Good = 740 to 799
  3. Good = 670 to 739
  4. Fair = 580 to 669
  5. Poor = 579 and below

Reducing debt, missing payments, creating new credit accounts (among other factors) can all positively and negatively affect it.

Ultimately the FICO score makes the lending process efficient and fair. It applies the same set of standards for all borrowers.

FICO’s New Scoring Model

FICO 9, the new scoring model, was officially released in August 2014 but has yet to be fully embraced by all lenders.

It includes a major change that you should know about if you are considering breaking a lease.

In addition to medical collections and third-party collections, rental payment history can now be incorporated in your credit score calculation.

This was previously excluded from your credit score but the latest update has changed that.

Rental payments are not typically reported to the credit bureaus, however, your landlord may be willing to participate in a program to report these.

If you have a limited credit history but are making rental payments on time, it may help to boost your credit rating.

Furthermore, if you are applying for a new apartment, it can only serve to shed a good light on you as an applicant.

Of course, if the opposite is true, it will hurt you.

There are many rent payment reporting services. Some charge a fee, while there is a couple of programs that offer this service for free.

Typically, there is a set-up fee, along with monthly payments or transactional charges.

RentTrack, CreditMyRent, RocktheScore, eRentPayment, PayYourRent, and ClearNow offer lower or no set-up fees.

If your landlord is already signed up for an online rental payment system like RentCafe, chances are that your rental payments are already being reported to at least one of the bureaus.

Unpaid balances including breaking a lease, being assessed damages after the fact or money withheld are commonly reported.

Credit bureaus, however, are finding that rent experience is one of the most difficult factors to track.

This is mostly due to the fact that the majority of landlords own small, 1-4 family unit properties and are highly unlikely to report it to the credit bureaus.

If you are suffering from poor credit, read our tips on How to Improve Your Credit.

How to Prevent the Negative Impacts of Breaking Your Lease?

Breaking a lease should be done with proper care and planning.

Many leases have the option of breaking your lease with notice but often come with fees and a loss of your security deposit.

Fear not though. There are some ways to break your lease without penalty.

Some of these include:

Subletting

If it does not state that you are prohibited from subleasing in the written lease, then you can sublet with or without your landlord’s permission.

If your apartment is rent-stabilized, you have a right to sublet your apartment following procedure-which is to ask the consent of your landlord in writing.

Your landlord should give you a written response in a reasonable amount of time. Refusal should be accompanied by a reasonable explanation.

If your landlord does not respond, refuses to provide an explanation, or provides an explanation that does not merit a refusal, you can sublet the apartment anyway.

  • You also must get the approval of any other roommates currently living with you. Make sure all details are clear like rent payments, other non-rent costs, when to do showings when they will meet roommates, rules, and any other important factors.
  • You are taking a risk when you decide to sublet. Since you are the one on the written lease, you will remain financially responsible for all rent and damages that might be unpaid. Make sure a written agreement is made and all parties agree to the terms and conditions.
  • You should ask the sublessee if they are also interested in sign a new lease once the sublease period is up, so you can give your landlord or roommates a heads up.

Re-renting

Re-renting is the process of finding a brand new tenant, without subletting. When trying this option it's always best to approach your landlord well in advance.

  • Reread your lease agreement to make sure that this is a viable option with no repercussions.
  • Re-renting your apartment will require the new tenant to sign a brand new lease agreement and pay their own security deposit.
  • Talk to your landlord because this will require them to re-list the unit and schedule showings for interested renters.
  • Depending on if the landlord can find a replacement for the unit will determine if you will be responsible for the remaining month’s rent.
  • Get involved in the process and find a replacement because it will not be the landlord’s number one priority.
  • Remember that the landlord will not rent to just anyone – it will largely be based on credit score, rental history, availability of funds and possibly more factors.

Having someone take over the lease

  • Again, re-reading your lease agreement and talking with your landlord first is essential.
  • It is up to you to find a qualified tenant who will want to sign on for the remaining months. Check applicant’s income, credit score, criminal and rental history before presenting the new replacement to your landlord.
  • Consult your landlord and check local laws to see if you will be responsible for rent payments if the new tenant defaults. You are only off-the-hook if there is a specific clause releasing you in your assignment agreement with the prospective tenant. Make sure this is included with your rental agreement when presenting it to your landlord.

Abandoning your lease

If you are not able to complete any of the previously mentioned options, it may be time to strike up a deal with your landlord.

If you get a sublessee or a new tenant, you may be able to get your security deposit back. However, abandoning your lease straight up will almost certainly result in the relinquishment of your deposit.

If you want to minimize bad blood with your landlord you can offer an extra month or two of rent to help hold him or her over while they are looking for a new tenant.

Your landlord may not be open to this, but it's worth trying to reach a compromise with him or her for your record's sake.

The Takeaway on Breaking Your Lease

If done with enough forethought and consideration, breaking your lease will not damage your credit score.

The relationship you have with your landlord will play a major part as to whether this process will go smoothly or not.

If you have proven yourself as a responsible tenant, then your landlord will be more likely to cooperate and be understanding.

It is always a good idea to first re-read your lease agreement and talk the matter over with your landlord to get a better idea of your options.

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