Do Apartments Do Hard or Soft Credit Checks?
Understand apartment credit checks, their impact on your score, and how to prepare. Get clear insights into landlord reviews for your rental application.
Landlords commonly conduct credit checks during the apartment application process to evaluate a prospective tenant’s financial reliability. This helps property owners determine an applicant’s ability to consistently meet rent obligations.
Understanding Apartment Credit Checks
Credit checks are categorized into two main types: soft inquiries and hard inquiries. A soft inquiry, also known as a soft pull, occurs when someone checks your credit report without it being tied to a specific credit application, such as when you check your own credit score or a company pre-screens you for an offer. Soft inquiries do not affect your credit score and are not visible to other lenders.
A hard inquiry, or hard pull, happens when you apply for new credit, such as a loan, credit card, or mortgage. These checks are more thorough and require your explicit permission. Landlords and property management companies perform a hard credit check when you submit an apartment application, as they need a comprehensive view of your financial history to assess your financial responsibility and the likelihood of timely rent payments.
What Information Landlords Review
When a landlord conducts a credit check, they access details from your credit report to gauge your financial behavior. This includes your payment history, showing how consistently you have paid bills and loans on time. Landlords also see information about your outstanding debts, such as credit card balances, loans, and their minimum monthly payments. They assess your credit utilization, which is the amount of credit you are using compared to your available credit limits.
The report also reveals negative information like loan defaults, accounts sent to collections, and public records such as bankruptcies or tax liens. While evictions do not directly appear on a credit report, any unpaid rent or fees sent to collections after an eviction would show up as a collection account. Landlords verify income to ensure your monthly earnings are sufficient to cover rent and other expenses, requesting pay stubs, W-2 forms, or bank statements.
Impact on Your Credit Score
The hard inquiry performed by landlords can cause a slight, temporary dip in your credit score, by fewer than five to ten points. A hard inquiry remains on your credit report for up to two years, but most credit scoring models only consider inquiries from the most recent 12 months when calculating your score.
Applying to several apartments at once might result in multiple hard inquiries, each potentially causing a small, temporary reduction in your score. Unlike applying for multiple mortgage or auto loans within a short period, which credit scoring models may treat as a single inquiry, this does not apply to rental applications. However, with responsible credit management, your score recovers quickly from these minor impacts.
Preparing for an Apartment Application
It is advisable to obtain a copy of your own credit report before applying to identify and dispute any errors that could negatively affect your score. Understanding your current credit score provides insight into your financial standing.
If your credit history has negative marks, be prepared to provide a clear explanation to the landlord, as they may consider mitigating circumstances. Gathering financial documentation, such as recent pay stubs, bank statements, or employment verification letters, can demonstrate your income stability. If your credit history is limited or not strong, considering a co-signer with good credit who can guarantee the lease obligations may enhance your application.