Very few experiences in life are as exhilarating as moving out on your own. Whether you're applying for your very first apartment or you are a seasoned renter, it's a given that your prospective landlord will request your permission to run a credit check before allowing you to sign a lease. Unfortunately, permitting a landlord to pull your credit report could have adverse consequences for your credit rating.
Whenever a business or individual pulls your credit report, an inquiry appears on your credit history. This inquiry shows you who pulled the report and when it was pulled. Most landlords that perform credit screenings conduct a "soft" inquiry. A soft inquiry has no impact on your credit rating. Thus, you can incur as many soft inquiries as necessary without hurting your credit score.
Hard inquiries are generally connected to financial transactions. For example, a bank will conduct a hard inquiry when you apply for a mortgage loan. Unlike soft inquiries, hard inquiries have an adverse effect on your credit rating. While most landlords will conduct a soft inquiry, not all landlords pull applicants' credit histories the same way and a prospective landlord can conduct either a hard or soft credit inquiry. That does not mean that you should refrain from applying for an apartment you like simply because the apartment manager notes his intention to conduct a hard credit inquiry. While hard inquiries lower your score, they do so by a very small margin -- typically no more than five points.
Preventing Credit Damage
Depending on the landlord's policies, you may be able to avoid a hard pull on your credit report while still landing the apartment of your dreams. The Fair Credit Reporting Act gives you the right to pull a copy of your credit history from each credit bureau once a year at no charge. If the apartment manager notes the company's intention to conduct a hard inquiry, ask if the company will accept a copy of your credit report that you pulled and printed out yourself. Pulling your own credit does not hurt your credit rating. If the landlord accepts your proposal, you can prove that you meet the credit guidelines while protecting your credit report from a hard inquiry.
Most negative information on your credit report sticks around and haunts your credit history for seven years. Fortunately, this is not the case with credit inquiries. Fair Isaac Corp. -- the company responsible for FICO scores -- notes on its website, myFICO.com, that credit inquiries only remain on file for two years. In addition, a hard inquiry only impacts your credit score for 12 months from the date you received it. Thus, you can fill out your rental application with the security of knowing that a single hard inquiry isn't likely to stand between you and your future financial needs.
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