An eviction tidal wave is about to crash into our economy, and Credit Heroes must prepare for it!
That's why on this week's Podcast, I explain why mass evictions are coming, how evictions affect people's credit, and how you can remove them!
According to the US Census Bureau, 3.8 million tenants will be evicted from their homes in September and October, and that's a lot of people having major post-pandemic financial hardship, so we are looking at a massive issue that our industry needs to fix right now.
That's why today I'm going to explain why mass evictions are coming, how evictions affect people's credit, and how you can remove them!
Have you ever been evicted or threatened with eviction?
I've been evicted. It was terrible. It was embarrassing. I had to go to court and face my landlord, Mr. Akhavi, who was so mean. And he didn't evict me because I did anything wrong. No, I always paid my rent on time, and I was the perfect tenant. I left him alone, and I fixed stuff myself. But he evicted me because that allowed him to raise the rent. What a bastard!
We went to court. I paid for a lawyer, which was money I didn't have.
I thought I had a great case. But he said all this terrible stuff about me that wasn't true. And I lost. They gave me a week to move, but I was leaving on the road for a gig two days later, so suddenly, I had 24 hours to pack everything and find a new place, or all my stuff would be thrown out.
Getting evicted sucks!
It's a horrible process for everyone involved, and it leaves the evicted person in the very difficult position of trying to find new housing with an eviction mark on their record.
On average, American landlords file 3.6 million eviction cases every year.
But this year, we are expecting to see 3.8 million evictions just in September and October alone!
And on top of that, the US Census Bureau also estimates that 8.5 million tenants are currently behind on their rent.
So how did this happen?
Well, the answer is complicated. But here are some of the reasons...
Rents have skyrocketed - according to Zillow, rents have increased almost 25% since the pandemic began, and the majority of that increase happened in just the last 12 months.
And this summer, the US median rent reached its highest level ever recorded: at $2,000 per month. That's a lot of money for the average person!
There's also an Affordable Housing Shortage - I call it an Affordable Housing Shortage because, according to the 2020 Census, nearly 10% of all homes are vacant, so the issue shouldn't be considered a "housing shortage" the way some politicians and news shows make it out to be.
Whether landlords are unwilling or unable to lower rents, there are vacant properties, and there are plenty of people who can't afford to live in them.
Current estimates show there are only 37 Affordable Rental Homes for every 100 low-income households. And with rents consistently rising, it's difficult to see this disparity getting any better.
This brings us to the most impactful cause of all…
High Inflation and Low Wages - According to the National Low Income Housing Coalition, a worker has to earn $21.25 an hour to be able to afford a "modest" one-bedroom home. This means the average minimum wage worker has to work 79 hours a week to be able to live in a one-bedroom unit. That's insane, and it's not fair!
Here in California, the average minimum wage worker would have to work 83 hours a week to be able to afford a simple one-bedroom.
I have a friend who works at the grocery store. And he saw my Credit Hero t-shirt one day, and he started asking me questions about his credit. So I gave him lots of advice to raise his score, and I've been checking in with him whenever I shop to see how his score is doing.
He doesn't know that I know, but he's actually living in a tent right around the corner from my house. I've seen him there by his tent when I walk to work.
And this is a guy who has a full-time job, and still, he's living in a tent for at least the past year.
And last week, when I saw him in the store, he said his credit was now over 700, and I said that's awesome. I'm so proud of you. And he was excited because it should qualify him to get an apartment. But he was still having trouble getting anyone to rent to him, even with that amazing credit score.
This may be why, near my home in Venice Beach, tent cities are filling freeway underpasses, streets are lined with people living in their cars, and just last Sunday, a bunch of homeless people caused a fire at the construction site they were sleeping in that damaged several homes.
Thankfully no one was hurt, but the problem is everywhere, and there's no simple solution! But one thing is clear, skyrocketing rents and stagnant low wages are causing this disaster.
The current federal minimum wage was last raised to $7.25 in 2009, and some economists are already saying that the proposal to raise the minimum wage to $15 an hour is still enough for people to survive. It's really bad out there for a majority of Americans.
Here's the thing to remember…
Evictions are a complicated problem in the credit world, but we have to educate ourselves and our customers on how evictions impact credit, and we need to teach strategies for eviction recovery.
Now, I say it's complicated because evictions usually won't show up on credit reports at all, but they typically stay on public records for up to seven years.
In other words, evictions don't directly affect credit reports, but credit can be impacted by the circumstances related to eviction.
Here's why this is important…
If someone is evicted for a reason other than non-payment of rent, like violating their lease agreement, their credit shouldn't be affected at all.
If someone is evicted because they didn't pay their rent and they have a collection account open, their credit reports will have a derogatory mark for that collection, and that can stay on their credit reports for up to 7 years. That collection account will negatively affect a credit score.
Beyond credit reports, if a legal case is brought up to evict a tenant, that case file can be accessed indefinitely through court records.
It's also important to know that an eviction shouldn't make it more difficult to get financing for a new loan, but it could make it harder to get a new apartment to rent because Landlords use the Public Record Database to determine if someone has been evicted in the past.
So, even though evictions don't technically affect credit reports directly, they still impact people's credit and have long-lasting consequences resulting in lower credit scores, higher interest rates, and marks on your public records that all contribute to making finding rental housing very difficult in the future.
I haven't asked, but I bet that's why my friend is living in a tent.
Here's what you need to know…
Of course, the best piece of advice is to avoid evictions altogether. With that being said…
If someone is evicted for any reason besides non-payment of rent, then their credit won't be affected. They will probably just need to explain their situation to their new landlord and expect to pay slightly higher rent.
If someone is being evicted for non-payment of rent and they're still in the eviction process, they should do everything in their power to fix the problem before going to court. Settle. Pay the back rent, work with the landlord and determine a mutually beneficial solution that doesn't involve the courts.
I wish I had known that when I was evicted because that's on my record forever.
Now, if someone has been wrongly evicted, they should consider pursuing legal action in court. If you or your clients would like to learn more, the CFPB lists Renter Protection Resources on its website.
If someone was already evicted because of non-payment of rent and that debt went to collections, follow these FIVE steps to remove that from the credit report…
- Attempt to repay or settle the debt. Negotiate with the property manager, landlord, or collection agency, and determine a sum or payment plan.
- Once the debt is settled or paid off, request any collections accounts be removed from their credit reports.
- Ask to have the eviction records removed from their Tenant-Screening reports as a condition of repayment.
- Verify that the items related to the eviction have been removed from their credit report and Tenant-Screening report.
- Dispute any inaccuracies related to the eviction with the Credit Bureaus and Tenant-Screening Agencies.
If handled correctly, evictions can be avoided, but when circumstances cause them to be unavoidable, you can still ensure that the impact is minimal instead of devastating.
And my final point…
When people are evicted, they don't just lose a home. They lose the ability to easily find their next home.
Whether it's because of inflation, not enough affordable housing, or stagnant wages, no one should be forced to live in a tent, in their car, or on the street.
As this eviction wave approaches, we have to be prepared to help a lot of people.
I'll end by saying…
If you don't already have a Credit Repair Cloud account, check it out. It's the software that most Credit Repair businesses in America run on. Just sign up for a 30-Day Free Trial at CreditRepairCloud.com/freetrial
And if you'd like me to teach you how to grow your credit repair business, check out our Credit Hero Challenge!
It's an amazing program, and we've got another challenge starting in a few days, so grab your spot right now at CreditHeroChallenge.com!
Until next time, remember
When you repair an eviction, you help someone find a home!
Keep changing lives!