WSJ Your Money Briefing - The Hardball Tactic Landlords Use to Tank Your Credit Score

Episode Date: February 21, 2025

Landlords say that tackling rental disputes by targeting credit scores is more effective than lengthy legal battles. But consumer advocates say it gives landlords unchecked power. Wall Street Journal reporter Caitlin Ostroff joins host Ariana Aspuru to discuss what renters need to know.  Sign up for the WSJ's free Markets A.M. newsletter.  Learn more about your ad choices. Visit megaphone.fm/adchoices

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Register by March 15th. Additional terms apply. Learn more at wealthsimple.com slash match. Here's your money briefing for Friday, February 21st. I'm Mariana Aspuru for The Wall Street Journal. Landlords are using a harsh tactic in rent disputes, damaging tenants' credit scores. And we talked to some people whose credit score went down one or two hundred points as a result of this.

And so it can be an instance where, you know, maybe the alleged debt is small, or it can be that the credit ratings agencies say, just because you have this debt, we think that it is significant and it's going to cause your credit score to follow up. We'll talk with Wall Street Journal reporter, Caitlin Ostroff, about how tenants are fighting back. That's after the break. With the Fizz loyalty program, you get rewarded just for having a mobile plan. You know, for texting and stuff.

And if you're not getting rewards like extra data and dollars off with your mobile plan, you're not with Fizz. Switch today. Conditions apply. Details at f phys.ca. More than half of all small claims disputes are rent cases. But unlike in court, landlords and debt collectors can act as both judge and jury by reporting rent disputes directly to credit bureaus. Wall Street Journal reporter Caitlin Ostroff joins me.

Caitlin, why are landlords taking this approach? So this is in part because there was a change in how credit agencies use public records in 2017. It's harder to get things like evictions, other sort of public judgments onto credit reports now as a way to level the playing field more in favor of tenants. And so now landlords who are worried that whoever they're renting to might not make good on the lease. It's a new way where they can sort of park something more permanently to report alleged debts owed essentially onto the credit agencies

to debt collectors. But we're also just seeing this because it's become easier for some landlords to decide I'm going to bypass the small claims court and I'm just going to send it onto the debt collector and let it be their problem and let them try and recoup the funds. So they're kind of taking an extra step now that they didn't used to. Yes. What kind of power does this give landlords? So this gives landlords the power to basically decide, I say you owe me X amount of money.

Sometimes that's the rent from the lease agreement if a month or two isn't paid. But it can also be for incidental charges that landlords claim are owed to them. We've seen cases where if a stove or some other part of the apartment needs to be replaced, sometimes that will end up on the list of alleged money owed. So if you are a renter and your landlord is claiming that you owe X money, the first step that they take in this process is they call a debt collector. And they say, Caitlin Ostrov owes me X amount of money because of this. And so the debt collector says, okay, and they will call me or

send emails and say, this debt is alleged, you have to pay this. And I might dispute that to them. And they'll go back to the landlord, the landlord often will say, no, this debt is correct, And that will be that. What the debt collector will then in turn do is if they don't think that they can get this money from me just by calling me, is they will forward it on to one of the credit ratings agencies.

And they will say, Caitlin has not paid this. She is not credit worthy. Please add this to her credit report. I can go and contest that with the credit agencies as well after it's published on my credit report, but at each step in this way, it is difficult, according to consumer lawyers we've spoken to, to get this information removed from your account, even with the proof that you think clears you of the alleged debts. So it's difficult to have sort of checks and balances, for lack of a better word here.

Yeah. The landlord in these cases does have quite a lot of power in setting this whole thing in motion. And it can be very hard to undo, which is why a lot of these cases are brought to federal court. And how effective is that? Almost all of these cases ended in settlements. On the one hand, you can argue that is effective

because most of the people who settled couldn't speak to us about what had occurred. But by and large, attorneys we spoke to said that when a settlement happens, it does get removed from the credit report. In some ways, that can be a tool, but it's also very frustrating and it's a longer process than just being able to send a letter to a credit agency and say, hey, I saw that you added this. Here are photos from before I moved in showing that this was in this condition. Here is a copy of the lease saying that I followed the correct procedures. Can you please remove that and not having that

work? And how much weight does this damage carry on your credit score? I mean, it can carry a lot of damage, but that's the other thing is the secret sauce that makes credit scores what they are isn't a very straightforward or transparent system. The amount in which this impacts your credit score can range widely. And we talked to some people whose credit score went down one or 200 points as a result of this. And so it can be an instance where, you know, maybe the alleged debt is

small, and so the impact is much smaller. Or it can be that the credit ratings agencies say, just because you have this debt, we think that it is significant and it's going to cause your credit score to fall off. But once renters see this hit on their credit score, can they dispute it before it starts affecting their everyday lives, their other apartments? You can dispute it at the debt collector and you can also dispute it to the credit agencies. But often what we've heard from lawyers is that even if people have documentation that they furnish to debt collectors, credit agencies, that often isn't enough to get it taken off.

And a lot of the people we've spoken to who have sued not just for monetary damages for like what their lower credit score has financially impacted them over, it's often just to even get it removed because often just disputing state credit bureaus doesn't actually change anything. Lylea Kaye If someone's currently dealing with a rent dispute and they want to avoid this negative hit to their credit score, what are some steps that they can take? Emily O'Neill First and foremost, you should dispute. That's what every consumer lawyer we've spoken to have told us is having the documentation that you say

that's not right helps if you need to go the legal route. And then also reaching out to either a lawyer or a consumer advocate, help organization reach out to get advice from someone. Are there things that you can proactively do before you find yourself in a dispute over your rental payments? Just in case this happens, you have everything you need

to sort of back your case. It's just a matter of lots of documentation. So if you're negotiating a lease or terms of a lease, do that in writing, or at least get copies of things that you discussed over the phone in writing. If you are moving into an apartment, take photos on the first day, document the state of everything, do the same when you're moving out, and just

try and keep good records of when you've communicated about certain issues, be specific. That way if a dispute occurs, you have evidence to back up whatever your side is. That's Wall Street Journal reporter Caitlin Ostroff. And that's it for your money briefing. Tomorrow we'll have our weekly markets wrap up. What's news in markets. This episode was hosted and produced by me, Arianna Aspuru. Jessica Fenton and Michael Laval wrote our theme music.

Our supervising producer is Melanie Roy. Aisha Al-Muslim is our development producer. Scott Salloway and Chris Sinzley are our deputy editors. And Falana Patterson is The Wall Street Journal's head of news audio. Thanks for listening.