Renters made up a third of all households in the country, or 46 million households, as of 2021. More American households were headed by renters than at any point in the past five decades as of 2016, according to Census data analyzed by the Pew Research Center. Median rent prices increased 12% since before the pandemic, especially in larger metro areas.
Renting an apartment typically involves a pull of your credit information for landlords to assess your ability to pay rent. You may be asked to provide some basic information when you fill out a rental application and authorize the landlord or software service they're using to pull your credit score and view your credit reports.
You may be wondering if these credit checks hurt your score. The short answer is that some types of credit checks will hurt your score while others will have no impact. Read on to find out more about how rental credit checks affect your credit score.
How a Rental Credit Check Affects Your Credit Score
Rental credit and background checks allow landlords to assess your financial responsibility, payment history, and overall credit health before renting. There are a couple of different ways a landlord can check your credit:
- Individual landlords may use a software provided by landlord associations or tenant screening services. Bigger apartment buildings may also use similar screening services.
- The three major credit bureaus Equifax, Experian, and TransUnion, all offer paid credit screening products to landlords.
Hard Inquiry vs. Soft Inquiry
There are two types of credit inquiries: hard inquiries and soft inquiries. Hard inquiries lower your credit score temporarily, while soft inquiries do not.
Hard credit inquiries are typically made when you apply for a mortgage or credit card, and the potential lender, such as a bank, asks permission to review your credit score and credit reports to make a lending decision.
Soft inquiries have no effect on your score; examples include when you check your own credit score or credit reports via your bank or a financial app. Banks also use soft credit pulls to send you pre-approved offers for financial products in the mail.
How much will my credit score drop after a hard inquiry?
- FICO: Hard inquiries may lower your score by about five points, according to credit scoring company FICO. Hard inquiries stay on your credit reports for two years, although FICO scores only consider inquiries on your reports from the last 12 months.
- VantageScore: Your score will also drop by a few points after a hard inquiry, although VantageScore doesn't specify how much. But VantageScore also says "a credit score that’s lowered by a hard inquiry generally will increase back to its pre-inquiry level in just a few months – provided no new negative information is added to your credit files."
Multiple hard inquiries can hurt your score. However, there are some steps you can take to minimize the impact, which we'll cover in more detail below.
Rental Credit Checks as a Hard Inquiry
You may undergo either a hard credit check or a soft credit check for a rental application, depending on the screening service your landlord uses. You can always ask what type of check will be performed beforehand.
Landlords usually look at your credit profile in combination with other in-depth information such as eviction history, criminal records, and income data.
Factors Impacting Your Credit Score
There are a number of factors that go into how your credit score is calculated. Fortunately, hard inquiries are not a major part of the equation. FICO says the number of inquiries accounts for 10% of your overall score, while VantageScore says it is as low as 5% for the 3.0 version.
Here's a quick glance at the factors that affect both types of scores. (Note that FICO and VantageScore use slightly different definitions and assign different weights to each factor):
How to Minimize the Impact of Rental Credit Checks
There are a few strategic ways to minimize the impact of rental credit checks on your score. Start by checking your own credit score and credit reports. You can access your score for free via your bank or financial apps and you can also check your credit reports for free from each credit bureau.
Choose Your Applications Wisely
Focus your apartment search on properties where you meet the minimum requirements to increase your chances of approval. Before you apply, ask the landlord or property management company if they have a minimum credit score in mind for prospective tenants.
Multiple Applications Within a Specific Time Frame
Credit scoring companies take into account the fact that people shop around for products or apply to multiple places in a given timeframe. Multiple hard checks in that timeframe only count as one inquiry for your score, so you can plan and apply for apartments within that window.
FICO allows multiple inquiries within a 30 to 45-day window, depending on the model of the score used, while VantageScore allows multiple inquiries within a 14-day period.
Alternative Methods for Renting Without a Credit Check
Provide Supporting Documents
There are other ways to demonstrate your financial stability to a prospective landlord, by providing proof of income, employment history, rental references, or bank statements.
Offer to Pay a Higher Deposit
If you know your credit isn't the best, you can offer to pay more money upfront for a security deposit or pay a few months' rent in advance.
Find a Co-signer
You can ask someone else with good credit to be a co-signer or guarantor if your credit isn't strong enough to qualify. A co-signer is on the hook for rent if you cannot pay, which also puts their credit on the line. This could be a roommate with good credit or a loved one who signs for you.
Look for No Credit Check Rental Properties
Most reputable landlords will check your credit. Some individual landlords may be flexible about checking credit or you may be able to find no-credit-check apartments on the internet. Treat these listings with caution because some of them could be housing scams. Check the Federal Trade Commission's list of red flags to avoid falling victim to a scam.
How to Improve Your Credit Score for Future Rental Applications
Here are a few ways to work on your score to prepare for your next apartment search:
Use a Rent Reporting Service
Rent and utility payments aren't typically part of your credit reports. But if you fall behind on payments, it can hurt your score. We think getting rewarded for your positive rent and utility payments is an easy way to help your score. Boom lets you build credit by ensuring your on-time rent and utility payments – past and ongoing – are added to your credit reports.
Make Timely Payments
Paying on time is the most important part of the payment history factor in your FICO and VantageScores. Missing a payment or paying late can tank your score quickly, so it's critical to make on-time payments, every time.
Reduce Your Debt Utilization
The second-most-important factor in your score is your amounts owed or credit utilization, sometimes called debt utilization. This number, expressed as a percentage, shows how much of your available credit you're using.
Paying down your credit card balances and trying to pay off your balance in full every time lowers your utilization and helps your score. A rule of thumb is to keep balances below 30% of your total credit limits across all credit cards.
Build a Positive Rental History
Apart from your credit reports, you also have a rental history report that lists details about your previous tenancies. This report may be given to a landlord as part of a background check by the tenant screening service.
The Fair Credit Reporting Act (FCRA) which governs your credit information, also allows you to request a free copy of your rental history report from the three credit bureaus. Check to see if there are any errors on your report or prepare for any questions your landlord may ask.
Key Takeaways on Rental Credit Checks and Your Credit Score
When you apply for an apartment, a hard credit check can temporarily lower your score by a few points and stay on your credit reports for two years, while a soft credit check has no effect on your score.
FAQs
Does a landlord checking your credit score affect it?
The answer depends on whether the landlord runs a hard credit inquiry or a soft inquiry.
What credit score do you need to rent?
The average credit score of renters across the country was 638 in 2020, according to a study by
RentCafe, an apartment search website.
