One of the first things a landlord often does when you’re applying for an apartment is run a credit check to evaluate your financial reliability. Makes sense, but does this rental credit check affect your score?
Given the importance of your credit score in determining eligibility for future loans, credit cards, or even rentals, it’s key to really understand the impact of apartment credit checks. In this article, we'll clear up any confusion and get you prepared for your next rental application.
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What happens during an apartment credit check?
Before exploring the effects of a credit check on your score, it’s important to understand the process itself.
When you apply for an apartment, landlords or property management companies will typically perform a tenant screening, which includes a credit check. The credit check helps them assess your financial history, particularly whether you have a track record of paying bills on time.
Credit checks for apartments are usually obtained from one of the three major credit bureaus: Equifax, Experian, or TransUnion.
This report provides a snapshot of your credit behavior, including any outstanding debts, loans, or accounts in collections, which are major factors for property owners when deciding whether to approve your application.
There are two types of credit inquiries:
- Hard inquiries (also called “hard pulls”): Occurs when a lender or landlord checks your credit as part of a decision-making process
- Soft inquiries (“soft pulls”): Occur when you check your own credit, or when companies look at your credit history as part of a background check or pre-approval process
In most cases, landlords and property management companies use hard inquiries when they run a credit check.
So, does applying for an apartment hurt your credit score?
The short answer to “Does applying for an apartment affect your credit?” is: Yes, it can.
Soft inquiries don’t affect your credit score at all. A hard inquiry, on the other hand, can lower your score by a few points (typically five to 10 points), depending on your overall credit history. A hard inquiry can signal to lenders that you’re actively seeking new credit or taking on more financial obligations.
However, a single hard inquiry is unlikely to cause significant damage unless your score is already low or you have multiple inquiries in a short period.
Here’s a breakdown of why hard pulls can have this effect on your score:
Perceived credit risk
When you apply for new credit—whether it’s a loan, credit card, or apartment rental—a hard inquiry is recorded on your credit report. Lenders see multiple hard inquiries in a short period as a sign that you may be taking on more debt than you can handle, which increases their perceived risk.
Even though one or two inquiries won’t significantly affect your score, several inquiries in quick succession can raise red flags for potential lenders.
Credit utilization assessment
Hard inquiries slightly reduce your credit score because they are factored into the “new credit” portion of your FICO score, which makes up about 10% of your overall score.
While inquiries alone don’t reveal whether you’re financially overextended, lenders use them to assess how much new credit you’re applying for, alongside other factors like credit utilization (how much of your available credit you're using).
Credit stability indicator
Your credit score is meant to reflect your credit stability and reliability. A single hard inquiry may drop your score by five to 10 points, but having multiple inquiries can signal financial instability. This could make lenders or landlords hesitant to approve your application, as they may worry about your ability to handle additional credit or responsibilities.
Why landlords use hard inquiries
Landlords and property management companies typically use hard inquiries when running a credit check because they need a detailed report to assess whether you’re financially responsible enough to pay rent on time. Since hard inquiries provide more comprehensive information, they’re preferred for rental applications.
Does applying for apartments hurt credit? Generally, the more you apply for, the more likely it is to ding your overall credit score. Applying to several apartments at once might result in multiple hard inquiries, each causing a small, temporary dip in your score.
How long does a hard inquiry affect your credit?
The good news is that hard inquiries only affect your credit score for about one year, although they remain on your credit report for two years. In that first year, the inquiry has a small effect on your score, but it won’t drastically impact your ability to qualify for loans or additional credit in most cases. After the year is up, the inquiry will no longer influence your score at all.
What if I’m rejected? The effects on your credit score
It’s not uncommon to be rejected from an apartment application, but rest assured that a rejection doesn’t further harm your credit. The credit inquiry itself is what affects your score, not the outcome of the application. If you are denied, the inquiry will still show up on your report as a hard pull, but it won’t lower your score further.
Many landlords will provide an explanation if they deny your application based on your credit report. Here are some common reasons you may be turned down:
- Low credit score: Landlords use credit reports to assess your financial reliability, and if you have a history of late payments, high credit utilization, or accounts in collections, they may view you as a high-risk tenant. You can use this as an opportunity to improve your credit before your next application. Paying down debt, fixing any errors on your credit report, or building positive credit history with timely payments can all help boost your score.
- Insufficient income: Many landlords have income requirements, typically requiring that your monthly income is at least three times the rent. If your income doesn’t meet this threshold, you may be rejected because the landlord might worry about your ability to pay rent consistently.
- Negative rental history: A history of late rent payments, evictions, or disputes with previous landlords can raise concerns. Landlords want tenants with a track record of paying on time and maintaining good relationships with property managers. Negative feedback from past landlords may lead to a rejection.
- Criminal background: Landlords may conduct a background check in addition to a credit check. A criminal record, particularly for serious offenses, can be a reason for denial, depending on the landlord’s policies and the nature of the crime.
- Inadequate references: Landlords often ask for personal or professional references as part of the application. If you’re unable to provide strong references or if your references don’t speak positively about your reliability, it may harm your chances of approval.
Other reasons could be having a high debt-to-income ratio, inconsistent employment history, application errors or incomplete information, pet restrictions, among others.
How to minimize the impact of apartment credit checks
There are some proactive steps you can take to minimize the impact the effect of apartment credit checks on your credit score:
Inquire upfront to save your credit score
Before applying, it's always a good idea to ask the landlord or property manager about their credit check process. Specifically, find out if they use a hard or soft inquiry to assess your credit. Just ask, “What do you use in your rental application credit check: hard or soft pull?”
Soft inquiries won’t affect your score, while hard inquiries may lower it by a few points. Some landlords might be flexible and willing to use a soft pull if you express concerns about your credit score. Knowing this information in advance helps you protect your score while still moving forward with the application.
Choose quality over quantity
When apartment hunting, it’s tempting to apply to several places at once to increase your chances of approval. However, each application could lead to a hard inquiry, and multiple inquiries within a short period can add up. To minimize the impact on your score, be selective about the apartments you apply to.
Focus on properties where you meet the landlord’s qualifications and limit your applications to a few top choices. This approach reduces the risk of multiple hard inquiries and keeps your credit score intact.
Ask for a pre-approved option
Some landlords or rental services offer pre-approval options that use a soft inquiry instead of a hard one. Soft inquiries don’t impact your credit score, making this a great option for exploring potential rentals without affecting your financial standing.
Pre-approval gives you a sense of whether you meet the landlord’s qualifications, helping you narrow down your apartment search before formally applying. This can save you time and protect your credit score by reducing the number of hard pulls.
Keep tabs on your credit score
Regularly monitoring your credit report is a smart habit, especially when you’re planning to apply for an apartment. Reviewing your report allows you to catch any errors or inaccuracies that might negatively affect your score.
You’re entitled to one free credit report per year from each of the three major credit bureaus, so take advantage of these services. By keeping an eye on your credit history, you can address any issues before they become obstacles in your apartment search.
Boost your credit before the big move
If your credit score isn’t where you want it to be, consider taking steps to improve it before applying for an apartment. Pay down outstanding debts, ensure you’re making on-time payments, and avoid opening new lines of credit in the months leading up to your application.
By boosting your credit score, you not only increase your chances of being approved for an apartment but also position yourself for better lease terms, such as lower security deposits or more flexibility from landlords.
Key takeaways
So, does applying for apartments hurt your credit? It might. While a single hard inquiry typically won’t have a lasting impact, multiple inquiries or credit missteps can add up over time. The key is to be proactive—ask about the type of inquiry, apply strategically, and make sure your credit is in good shape before you start your search.
However, it’s also worth noting that while credit checks are important, they’re just one piece of the puzzle. Some landlords put more weight on factors like income, rental history, or references, so a less-than-perfect credit score doesn’t automatically mean you’ll be rejected.
In fact, there are ways to work around credit issues, such as offering a higher security deposit or getting a co-signer if needed.
Ultimately, securing your ideal apartment is about balance. Protecting your credit is essential, but don’t let it paralyze your search. By understanding how apartment credit checks work and taking a few smart steps, you can confidently navigate the process without unnecessary financial stress. So, go after that dream apartment—just be smart and strategic about it!