Don't Let a Roommate Ruin Your Credit
Having a roommate can help you lower housing costs, which is helpful especially in cities with high rent. However, your roommate’s financial habits could end up affecting yours, particularly if the roommate doesn’t make timely payments on shared bills.
You can make shared living easier and keep your roommate from ruining your credit by setting the rules for space and bill sharing from the beginning. Decide who’s going to be on the lease (the landlord may require both people), whose name the utilities will be in, and how bills will be paid each month.
Sharing a Lease
Many landlords require all adult occupants to be on a lease. In that case, everyone on the lease is responsible for the rent each month. When the rent is late, the landlord will pursue everyone on the lease for the unpaid amount. If your roommate fails to pay their part of the rent, the two of you risk being evicted, even if you’ve been paying your portion on time each month.
Although an eviction will not wind up on your credit report, an unpaid balance could show on your report and make it harder for you to rent in the future. It can even hurt your ability to get a job, promotion, auto loan, mortgage, or credit card.
Some landlords create separate leasing agreements, in which case only the roommate who defaults on their share of the rent is affected by late payments. Make sure you know how your lease is set up.
When Your Roommate Isn't Paying
If your roommate isn’t paying their share of the rent, try discussing it first. Let them know how much harder it is for you when their portion of the rent is late. Talk about the eviction risk you both face if the roommate doesn’t pay up. If that’s not effective, discuss your options with your landlord. You may be able to move to another unit without a roommate, depending on whether you can afford it.
You have other options, but they're not as attractive. You can pay the full rent on your own until the lease runs out. You could also opt to pay a fee to terminate your lease early. This isn't ideal, but it's better than being evicted.
Your lease and your state’s tenant laws will spell out the rights you have as a tenant and as a roommate. For example, you may have the right to evict your roommate for nonpayment, depending on how the lease was signed (if you're the primary signer, for instance, and the roommate isn't on the lease or is a sublessee). Or, the law may allow you to sue your roommate for the rent you paid on their behalf.
Roommates also share utilities. Sometimes utilities are paid directly to the landlord, but often the utilities will be in your or your roommate’s name. You are ultimately responsible for the bills in your name, no matter what oral agreements you’ve made with your roommate. If your roommate isn’t sending their portion of the utilities, it’s important that you first pay the bills for which you’re responsible and try to collect from your roommate later. That may mean taking your roommate to small claims court.
When the Utilities Are in Your Name
Show your roommate a copy of the bill when it comes, and then ask that they give you their share in advance of the due date. Pay the bill even if your roommate doesn’t give you their part, and keep a record of what your roommate owes you.
When it’s time to move out, make sure you disconnect services or have your roommate switch the utilities to their own name. Too often, people leave the utilities on at a place where they no longer live. Then, when the roommate doesn’t pay the bill, the original tenant doesn’t figure it out until the bill has gone to collections. Although regular utility payments aren’t listed on your credit report, unpaid utility accounts may be sent to collections and placed on your credit report and will typically remain for seven years, even after you’ve paid.
When the Utilities Are Not in Your Name
If your roommate is responsible for the utilities, ask them to show you a copy of the bill each month in advance of the due date. You need to be sure the bills are being paid and you know your roommate is being honest about your portion of the bill. Your roommate’s failure to pay utilities in their name won’t affect your credit unless you’re also listed on the account. However, your roommate’s failure to pay can leave you in the dark or without water.
A roommate agreement is one way to keep everything in order. You can both sign off on your commitments, including everything from who is paying rent and utilities and when to what happens if someone moves out early.
The Bottom Line
In a nutshell, when you’re living with a roommate, you have to make sure all the bills in your name are paid, even if you have to pay them yourself. Any unpaid bill can eventually affect your credit score. Considering it takes seven years for most negative information to fall off your credit report, it’s better to avoid delinquent bills altogether.
Experian. "Eviction is Not Shown on a Credit Report." Accessed April 3, 2020.
Nolo. "Sue Your Roommate for Unpaid Rent." Accessed April 13, 2020.
Experian. "Can Utility Bills Appear on Your Credit Report?" Accessed April 13, 2020.
Experian. "How Long Do Collections Stay on Your Credit Report?" Accessed April 13, 2020.