Your credit report data may be a determining factor in whether a landlord will give you that rental apartment. Rental management companies and landlords will routinely make credit inquiries to determine your likelihood of payment delinquency that can potentially lead to necessary eviction. Although some other key factors in determining your suitability can be obtained from landlord tenant history reports and criminal reports, consumer credit reports -- particularly your scores -- will give an overall idea of your ability to make on-time payments. These inquiries generally have little effect on your credit score.
To protect their rental assets, landlords and estate management companies normally try to establish your risk level through screening. A typical screen will check various databases for your past history, including eviction and criminal records across states, address search, national sex offender registry, Social Security number fraud check, and credit evaluation -- from the major credit bureaus. In some cases you will be informed about these checks, or your permission may be sought to run a credit check on you.
When your prospective landlord pulls your credit report, usually to confirm your identity, it generates a soft inquiry. Credit bureaus treat these inquiries as though you are the one who requested them. As such, tenant screening that makes soft pulls on your credit report is neutral toward your credit score. When hunting for a rental place to live, you can can incur as many screenings as necessary without hurting your credit score.
A hard inquiry will appear on your report if, during the screening process, the landlord or company requests your credit score and history. Such an inquiry will have an impact on your credit rating -- it will negatively impact your credit score, because the computation algorithm for scores takes the number of hard inquiries into account. Hard inquiries will ding your score for one year and continue to appear on your credit report for two years.
Effect on Score
If the screening process results in a hard inquiry, your credit score will drop by a few points -- no more than five points -- typically for six months, and then the effect on your score is removed. For perspective, on the FICO credit scoring model, where scores range from 300 to 850, inquiries have a marginal effect. Hard inquiries will only have a greater impact if you have a short credit history, few accounts or other issues such as late payments or high debt.
Dr Jack Gordon, the Chief Technology Officer at Strontium Logistics, is a 20-year veteran of the engineering and marketing business who favors stiff drinks, good debates and developing innovative digital marketing strategies to help companies grow.