If you’re planning to rent a new apartment, especially if you’re relocating to a new area, you might be concerned about how the application process could impact your credit score. While it’s a good idea to explore several rental options, you need to be strategic about where you submit your applications to avoid potential harm to your credit score.
Understanding Credit Inquiries
When landlords evaluate potential tenants, they usually conduct credit checks. These checks are essential for landlords to assess the financial reliability of applicants. However, the type of inquiry made on your credit report can affect your credit score differently.
Hard vs. Soft Inquiries
There are two types of credit inquiries: hard and soft. A hard inquiry occurs when a lender or landlord checks your credit report as part of a decision-making process for extending credit, such as a mortgage or rental agreement. Hard inquiries can lower your credit score temporarily. Conversely, a soft inquiry occurs when you check your own credit or when a landlord conducts a preliminary check that doesn’t affect your score.
Minimizing Credit Score Impact
To minimize the impact on your credit score when applying for rentals, follow these tips:
- Be Selective with Applications: Avoid submitting multiple rental applications simultaneously. Instead, narrow down your choices to your top three preferred properties. This approach reduces the number of hard inquiries on your credit report.
- Ask About Tenant Screening: Before submitting an application, ask the landlord or leasing agent about their screening process. Specifically, inquire whether they conduct a hard or soft inquiry. Understanding this can help you make informed decisions about where to apply.
- Space Out Applications: If possible, space out your rental applications. This can prevent a sudden surge of hard inquiries, which could significantly impact your credit score.
Tenant Screening Companies
Tenant screening companies often conduct these credit checks. Unlike the big three credit reporting agencies (TransUnion, Equifax, and Experian), tenant screening companies operate with less regulation and transparency. Their reports may include your credit report along with other details such as eviction and criminal records. These reports can also contain errors, so it’s important to review them carefully.
Checking Your Credit Reports
Regularly checking your credit report is crucial. You are entitled to a free annual credit report from each of the major credit bureaus. Additionally, if a tenant screening company is used by a prospective landlord, you can request a copy of your report from that company. Reviewing these reports allows you to correct any inaccuracies that could negatively affect your rental applications.
Final Thoughts
Renting a new apartment is an exciting step, but it’s essential to manage your credit score carefully throughout the process. By being selective about where you apply, understanding the types of credit inquiries, and regularly checking your credit reports, you can protect your credit score while finding the perfect rental home.
