Does Breaking a Lease Hurt Your Credit if You Cannot Pay?

Life changes, such as unemployment or a medical disaster, can hit anybody at any time, but the credit reporting bureaus do not keep track of your personal life. If you have to break a lease, prepare for a hit to your credit rating. However, there are legal ways to get out of your lease. In the future, you should look for housing that does not entail a lengthy obligation.

Identification

Breaking any lease, such as for an apartment or car, almost always damages your credit rating, even if you cannot pay. Inability to pay a debt cannot be a legitimate excuse to default on any debt, because consumers could use that argument for failure to pay any bill. Even if a creditor does not report to the credit bureaus directly, the bureaus will find out about the debt through public records or if a collection agency reports the debt.

Negotiate Termination

Most landlords will negotiate a termination of your lease rather than risk you breaking it voluntarily and forcing a lawsuit. Your lease may even have a termination clause in it, such as a month's rent penalty and the cost to clean the place. The landlord may also help you find another tenant to assume your lease. Walking away from the lease should never be an option.

Legally Breaking Lease

There may be some instances where you can legally break your lease. For instance, some states allow members of the military to terminate a lease when they go overseas, according to Sally Anderson of MSN.com. You also may be able to terminate a lease when the lessor does not fulfill his obligations and causes you danger, such as if your roof collapses and the landlord refuses to pay for repairs.

Tips

For your next lease, look for one with a short-term obligation, such as three months, or a month-to-month lease. You can also negotiate an early-termination option in your lease, such as a month or two months' rent penalty plus payments until someone assumes the lease. If your income is not enough pay for the dwelling, look for government help. You may receive rental assistance if your rent comprises more than 30 percent of your pay and your landlord accepts housing vouchers.