When it comes to renting an apartment, landlords and property management companies often perform a credit check to evaluate potential tenants’ financial responsibility. While credit checks are a common part of the rental application process, many renters are concerned about the impact of credit checks on their credit scores.
In this comprehensive guide, we will explore whether apartment credit checks lower your score and provide a comprehensive overview of how credit checks work and their potential impact.
What is a credit check?
A credit check is a process of assessing an individual’s creditworthiness by examining their credit history. Credit checks are typically performed by lenders, landlords, or employers to determine the likelihood of a borrower repaying a loan or fulfilling financial obligations.
There are two types of credit checks: hard inquiries and soft inquiries. A hard inquiry occurs when a lender or other entity pulls a borrower’s credit report to assess their creditworthiness. A soft inquiry, on the other hand, occurs when a borrower checks their own credit score or when a lender performs a pre-approval credit check.
How do apartment credit checks work?
When you apply for an apartment, the landlord or property management company will typically request your permission to perform a credit check. If you grant permission, the landlord will obtain a copy of your credit report from one or more of the major credit bureaus. The landlord will then review your credit report to evaluate your creditworthiness.
The credit check may include information such as your credit score, payment history, outstanding debts, and any derogatory marks on your credit report, such as bankruptcies or late payments. The landlord will use this information to assess your ability to pay rent and determine whether you are a suitable tenant.
Do apartment credit checks lower your score?
A credit check itself does not lower your credit score. However, a hard inquiry resulting from a credit check can cause a temporary dip in your credit score.
A hard inquiry typically results in a drop of five to ten points in your credit score, which is a relatively small decrease. However, if you have several hard inquiries in a short period, your credit score could be significantly impacted.
It’s worth noting that soft inquiries do not impact your credit score at all. So, if a landlord performs a pre-approval credit check or a soft inquiry, it will not affect your credit score.
How to minimize the impact of credit checks on your credit score?
If you’re concerned about the impact of credit checks on your credit score, there are several things you can do to minimize the impact:
- Limit credit applications
- Shop around for apartments
- Consider a co-signer
1. Limit credit applications:
Limit the number of credit applications you submit in a short period. Each hard inquiry can lower your credit score, so it’s essential to be selective when applying for credit.
2. Shop around for apartments:
Before submitting a rental application, shop around for apartments and compare rental rates and application fees. By doing so, you can limit the number of hard inquiries on your credit report.
3. Consider a co-signer:
If you have poor credit, consider finding a co-signer for your rental application. A co-signer with good credit can help strengthen your rental application and increase your chances of being approved.
Why do apartments perform credit checks?
Apartments perform credit checks to evaluate potential tenants’ creditworthiness and ability to pay rent on time.
Will an apartment credit check lower my credit score?
No, an apartment credit check will not lower your credit score. The credit check is considered a “soft inquiry” and does not affect your credit score.
What is the difference between a “soft inquiry” and a “hard inquiry” on my credit report?
A soft inquiry is a credit check that does not affect your credit score and is often performed for informational purposes. A hard inquiry is a credit check that can lower your credit score and is typically performed when you apply for credit.
Can multiple apartment credit checks lower my credit score?
No, multiple apartment credit checks within a short period of time are considered a “single inquiry” and will not significantly impact your credit score.
How long do apartment credit checks stay on my credit report?
Soft inquiries, like apartment credit checks, do not appear on your credit report at all. Hard inquiries can stay on your credit report for up to two years.
What should I do if I have bad credit and want to rent an apartment?
If you have bad credit, you may still be able to rent an apartment by providing a co-signer, paying a larger security deposit, or offering to pay rent in advance. It’s important to be honest with potential landlords and explain any extenuating circumstances that may have led to your poor credit history.
In conclusion, apartment credit checks can result in a temporary dip in your credit score. However, the impact is relatively minor, and the benefits of having a good rental history far outweigh the short-term dip in your credit score.
By following the tips mentioned above. You can minimize the impact of credit checks on your credit score and improve your chances of being approved for an apartment rental.