When You Apply for an Apartment, Is It a Hard Inquiry?
Understand how common credit checks for housing applications impact your financial standing and credit report.
Credit checks are a common element in many financial transactions, providing a snapshot of an individual’s financial behavior. Understanding how these checks operate is important, particularly when engaging in significant financial commitments such as securing housing.
Distinguishing Credit Inquiries
Credit inquiries are generally categorized into two main types: hard inquiries and soft inquiries. A hard inquiry, also known as a hard pull or hard credit check, occurs when a lender or company formally requests to review your credit report as part of a loan application process. This type of inquiry typically happens when you apply for credit cards, mortgages, or auto loans, and it generally requires your authorization.
In contrast, a soft inquiry, or soft pull, takes place when your credit is checked as part of a background review, not directly tied to a new credit application. Examples include checking your own credit report, pre-approved credit card offers, or certain background checks. A key distinction is that soft inquiries do not affect your credit scores, whereas hard inquiries can.
Credit Checks for Apartment Applications
When applying for an apartment, the credit check conducted by landlords or property managers often results in a hard inquiry. This allows them to assess your financial responsibility and predict your likelihood of making timely rent payments. Landlords use this detailed information to get a comprehensive picture of your credit history, including credit utilization rates and payment patterns.
While some sources suggest that apartment credit checks can sometimes be soft inquiries, especially if conducted through specific tenant screening services, the general practice for a thorough assessment tends to involve a hard inquiry. It is advisable to ask the landlord or property manager beforehand whether they perform a hard or soft pull to understand the potential impact on your credit.
How Inquiries Affect Your Credit
A single hard inquiry causes a small, temporary reduction in your credit score, often by five points or less. This impact is minimal and diminishes over time. Hard inquiries can remain on your credit report for up to two years, but they influence your FICO credit scores for about 12 months.
Multiple hard inquiries within a short timeframe can have a more significant effect, indicating to lenders that you may be taking on too much new debt. However, for certain types of loans, such as mortgages or auto loans, multiple inquiries made within a specific period (14 to 45 days) are grouped and counted as a single inquiry by credit scoring models. This grouping does not apply to diverse types of credit checks, like those for credit cards or apartment applications, meaning separate hard inquiries for different apartment applications could each individually affect your score.
Other Factors in Apartment Applications
Landlords consider several factors beyond credit inquiries when evaluating apartment applications. Income verification is a primary consideration, with many landlords requiring an applicant’s gross monthly income to be at least three times the monthly rent. This income-to-rent ratio helps determine if the tenant can realistically afford the housing costs alongside other living expenses.
Rental history provides insight into past tenancy behavior. Landlords often request references from previous landlords and may look for records of on-time payments, lease violations, or evictions. Background checks, which include reviewing criminal records, are conducted to ensure property and tenant safety.