Home > Credit Score > Credit Score Don’t: Signing an Apartment Lease on Behalf of Someone Else

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Maureen from San Diego wrote in asking for help regarding a challenging situation—a family member needs a favor, but one that can potentially hurt her credit score.

Her brother lost his job about a year ago and has subsequently fallen behind on his mortgage payments. On top of that, the value of the property has dropped by about 35% since the home was purchased, and is now worth far less than what is currently owed. Despite attempts to find a work-around, the situation has reached a point where foreclosure is imminent.

Maureen’s brother has started the process of searching for new housing, but is concerned about his chances of being approved for a rental as he was surprised to learn that many landlords pull a credit bureau report and score as part of the applicant review process. His credit score is already very low, as his missed payments on his mortgage and other credit accounts over the past year are already reflected in his credit report.

[Article: How Credit Inquiries Affect Your Credit Score]

Maureen’s brother has asked if she would be the primary on the rental application given she has good credit (credit scores above 720) and has a better chance of being approved—while he would actually make the rental payments.  Maureen wants to help, but has concerns doing this could have a negative impact on her credit rating.

Unfortunately, this situation is becoming more commonplace as the number of people in duress with their mortgage continues to remain at record levels.  As family members, it’s natural to want to help and provide the best support you can, and yet it is equally important to think carefully about potential short- and long-term ramifications these actions could have on your own financial profile.

The impact on Maureen’s credit report/score if she were to sign a rental lease would likely be minimal.  There may be a small number of points lost due to the credit inquiry that is posted on her file when the landlord pulls her credit report.  Right now, it is relatively uncommon that the payment history (positive or negative) for rent to be reported to the three national credit reporting agencies. However, the rental entity could opt to turn over a severely delinquent renter to a collection agency, and that could end up being reported and would be considered negative by the credit score.

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If your name is on the lease, it would be posted to your credit bureau report.  In addition, there are other smaller credit reporting agencies that may be capturing such information and a lender may access it when reviewing your application for credit.

It is important to note that the person signing the rental contract is legally liable for making the payments, regardless of any informal agreement one may have with a family member regarding who will actually be paying the rent (this holds true for roommates, as well).  That could have ramifications if you’re seeking new credit in the future.  For example, completing an application for credit usually requires you disclose all of your monthly debt obligations and your signature on that application indicates you have truthfully disclosed that information.  One could argue that disclosure of the monthly rental amount should be included if you are legally responsible for the lease.

The mixing of family and financial matters can be a recipe for angst and frustration.  When surfaced, it is a best practice to carefully review and understand potential ramifications before making any decisions that could have unintended consequences.

[Resource: Get your free Credit Report Card]

Image: Anthony Easton, via Flickr.com

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  • bmward

    My mom-age 92, lives in a senior residency.After being robbed 3 times-perscriptions,gold jewerly, some cash-then the manager team Husbaaan and wife left. She got scred and wanted to move. We looked at aa new apt unit under constuction,viewed the model and wanted to see the actual apt. The management team would not allow us because of “saftey”concerns.” They said sign a intent to rent,submit deposits and credit info. She did. Then she fell in her home and I called and cancelled the process for the apt.They now want almost $2,000 for breaking the lease agreement.We never saw the apt, and it was rented by the orginal moevindate, that was delayed by weather slowed constrution. Should we try to negotiate this amount (she left 400 in deposits) what would be the best move in this case? We are both at a loss but now understand the significance of alease agreement signed even under sales duress. Thank you

    • http://www.Credit.com/ Gerri Detweiler

      It sounds like you need to find out more about
      state landlord tenant laws in your area. Your mother may be eligible for help from Legal Aid as well.

  • Charles White

    Well, let’s see. If my family member needs a place to stay or he/she will be on the street, then I would obviously help them with rent. Yes, I would even put the lease in my name. I don’t think I could live with myself if I let something like that happen just so I can keep my score above 700. Who cares about the credit score at that point?

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