Although all inquiries on your credit are sourced from the same information, beware that all inquiries are not created equal! There are hard inquiries and there are soft inquiries.
Hard vs Soft Credit Check…what’s the difference?
Hard inquiries typically occur when you apply for credit with a financial institution. These most commonly take the form of loans, mortgages, or credit cards. The institution will check your score to assess your credit worthiness based on your credit history. This is an important step in the tenant verification process. However, people are becoming increasingly aware of the dangers to your credit score resulting from property rental applications.
Each time you pay and fill out an application for an apartment, pay attention because the property representative is most likely running a hard credit inquiry on you.
This means that your credit score may be damaged by up to 5 points for each application you submit. Five points may not seem like much, but many people have to apply to as many as five properties before they are accepted. And some people end up applying to as many as ten. This can decrease your credit score between 25 and 50 points.
For more info, read these 10 Facts Every Renter Should Know About Their Credit Score.
Not only are points deducted from your score, but also the inquiries are burned into your report for up to two years. Any future inquiries will reveal your previous inquiries, and this can begin to paint a picture of desperation to lenders who will be much less likely to grant the next loan you need.
For many younger apartment renters, this situation can be even more devastating because a stable credit history has not yet been established. Without a consistent credit track record, individuals initiating multiple hard apartment rental inquiries can seriously jeopardize their ability to get a home mortgage or auto loan down the road.
Soft inquiries usually occur when an individual checks their own credit or when a company checks your credit for background check or pre-approval purposes. Unlike hard inquires, soft inquiries do not damage your score. Agents can perform soft inquiries while verifying tenants to check up on their scores without having to worry about the consequences.
What can I do to protect myself?
The most important thing is to exercise caution and to avoid having too many hard inquiries. Although you can do this by applying to fewer apartments, there are exciting alternatives that you can utilize to protect your credit.
For instance, some apartment rental websites are now allowing the usage of soft inquiries in place of hard inquiries for apartment rental applications in their tenant verification service. The way this works is that the applicant can make a soft inquiry at first as if they’re viewing their own credit score.
However, these websites now empower apartment renters to quickly and securely share this soft inquiry with landlords. This occurs completely online and landlords can be sure that that the credit report has not been altered in any way by the applicant. Landlords and agents can finally run a comprehensive tenant verification without ruining their applicants' credit. It's a win-win situation.
You can use services such as the Los Angeles-based company RentSpree to view your credit score and then share your application with as many landlords as you want without the fear that your credit will be impacted. Landlords can also instantly collect tenant verification information. This includes a full credit report, background check, and eviction history.
Although younger renters with fragile credit histories will benefit from this greatly, people of all ages can take advantage of this credit preservation information to protect their future interests.
For more apartment rental tips, check out the Top 4 Reasons Your Apartment Rental Application Gets Rejected.