Your credit score and credit report data can be a determining factor when renting a home or apartment from a landlord. Landlords and rental management companies make credit inquires to determine your likelihood of rent delinquency which in turn help them decide whether or not to rent to you. Even though certain key factors in examining your payment delinquency can be obtained from your current landlord, tenant eviction history reports, criminal reports, and consumer credit reports offer additional details of your ability to make payments on time. Some credit inquires have little effect on your credit score while some inquiries affect your credit score adversely. Let’s look into it in detail.
What is tenant screening?
Generally, real estate management companies and landlords try to determine your financial capability and chances of payment delinquencies to protect their rental assets through tenant screening. A typical screening process will include examining various databases for your past payment history that includes nationwide criminal and eviction records, national sex offender registry, address search, Social Security Number fraud check, and credit evaluation from various major credit bureaus.
At times you will be informed about the credit check in advance or your permission may be sought to check your credit reports. There are two types of credit record inquiries, namely soft inquiry and hard inquiry, that are made during the tenant screening process. These two inquires and their effects on your credit are described below.
When your prospective rental management company or landlord pulls your credit report to confirm your identity, it is called as a soft inquiry. Credit bureaus treat soft inquiry as if you have requested them for identity confirmation. As a result tenant screening with a soft inquiry of your credit report is neutral towards your credit score. When looking for a rental apartment to reside you can acquire as many soft inquiries as necessary without harming your credit score.
A hard inquiry will be marked on your credit report if the rental management company or landlord requests your credit score and credit history during the tenant screening process. This kind of inquiry will even affect your credit rating adversely. Hard inquiry affects your credit score negatively because the computation algorithm takes the number of hard inquires into account. As a result, hard inquires hamper your credit score for one year and even continue to appear on your credit report for two years.
How credit inquiry affects your credit score?
If the tenant screening process needs a hard inquiry, your credit score drops by a few points. The drop is not more than five points. At times, hard inquiry has a marginal effect. For instance, on the FICO credit score, where scores range from 300 to 850, hard inquiries have a marginal impact. These hard inquires make a greater impact only if you have a short credit history, very few accounts, or record of issues such as high debts or late payments.
This is how credit inquiries affect your credit score during the tenant screening process. It is always better to have good credit history to minimize or avoid negative impact on the credit score when getting an apartment to rent.