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Does applying for an apartment hurt your credit?

does applying for apartments hurt your credit

Apartment applications may not hurt your credit score too much, but too many within a short period can take a toll on your FICO score

The average FICO score in the US is 716.1 If your score is lower, then you may be more worried about a decrease due to an apartment application. In this article, you’ll learn all about apartment rentals, hard credit checks, and how you can find your dream apartment without sacrificing your finances. 

Hard Credit Check vs. Soft Credit Check 

A hard credit inquiry is an official look into your credit report with data compiled from any one of the three major credit bureaus. When you apply for a personal loan, line of credit, or an apartment, lenders or property managers are going to request a hard copy of your credit report, also known as hard credit inquiries. 

Since hard credit checks are usually only used when a consumer is looking to take out a line of credit, having too many on your file may be a red flag when it comes to loan approvals. Typically, lenders are wary of consumers who apply for lines of credit frequently because it can indicate that they are financially irresponsible. This is why you want to limit the amount of hard credit checks you have on your credit file. 

Alternatively, a soft credit inquiry, also known as a soft credit pull, is an unofficial look at your financial data and may be accessed by consumers at pretty much any time. Since soft credit checks are unofficial reports, consumers can usually access them at any time with no consequence to their credit score/future credit reports. You can get a free credit report with most online financial accounts. Talk to your bank or credit card issuer to see how you can request monthly soft credit checks for free. 

How Is Your Credit Score Affected by Multiple Credit Checks for Rentals?

Do apartment credit checks hurt your credit score? The answer depends on how many apartment applications you fill out. Since the property manager at each location is most likely going to want an official credit report, filling out several applications within a short period of time may result in multiple credit inquiries. To avoid unnecessary damage to your credit score, you may want to limit the number of rental applications you fill out and only apply to places where you feel strongly about living.

What Credit Score Do You Need To Be Approved for an Apartment?

While it may be more challenging to find apartments for people with bad credit, it’s certainly not impossible. The credit score needed for approval on an apartment will depend on a few different factors. The most significant factor is the location; apartments in prime locations such as a big city or popular suburb may require a higher credit score for approval than an apartment in a more remote location in the countryside. 

In most cases, when an applicant’s credit score is on the higher side, they will have access to more housing options. 

How To Look for Apartments Without Affecting Your Own Credit Score

Your initial apartment search doesn’t have to involve a credit application at all! Check out the tips below for ways to search for an apartment before committing to hard credit pulls. 

Research Online

Before filling out an apartment application, ask yourself a few questions. First, how much are you willing to pay for your living expenses? Rent is just one expense; there are also utilities, groceries, and other monthly bills to consider when moving into a new apartment. Once you decide how much you are willing to spend each month, you can narrow down your apartment search to see what locations are available within your price range. 

Take Virtual Tours

You can take a look at a potential apartment without having to apply or show up in person with a virtual tour. Many apartment complex’s websites have the option to view the various floor plans they offer virtually. With a virtual tour, you can look at each room, see the dimensions, and get a feel for how the apartment is set up without having to set up a meeting or fill out an application. 

Virtual tours can also help you save time in your apartment search. If you see something you don’t like, you can simply click away and move on instead of being stuck in a stuffy meeting. Or, if you like what you see, you know it will be worth your time to fill out an application and visit the apartment in person. 

Visit the Property

It’s also free to visit local properties in your area and check out the outside of the building, the parking lot, the lobby, or other common areas. If you took a virtual tour and liked what you saw, it may be a good idea to visit the building before filling out an application. Check out the area, what stores/businesses are nearby, and how a commute might look to your place of employment. 

Once both the virtual tour and the property visit check out, you should feel safe about submitting an application and possibly going through a rental credit check. 

Ask People You Know/Look for Reviews

Old-fashioned word-of-mouth is also a great way to get an idea of what living at a certain apartment complex is like. If you know current tenants, ask how they like their experience living where they do. Ask if they think the landlord/property manager is good at their job. The answers you hear can be a great indication of whether the apartment complex will be a good fit for you or not. 

What Information Do Credit Bureaus Include in Your Own Credit Report?

Each month, the three major credit bureaus update your financial history and records to compile a credit report (the main three credit bureaus are Experian, TransUnion, and Equifax). 

Credit reports contain financial information such as: 

  • Payment history
  • Length of credit history
  • Records of hard credit checks
  • Your credit utilization and income ratios
  • How many different types of credit accounts you have

History of Making Payments

The most impactful factor contributing to someone’s credit score is their payment history. When you have a history of paying your bills and financial obligations on time, lenders see this as an indication that you are a financially responsible borrower.  

Length of Credit History

How long borrowers have had open and active credit accounts also contributes to their credit scores. While the length of your credit history doesn’t play a huge role in determining your credit score, it is still important not to ignore/neglect it. For example, if the first financial account you ever had was a credit card account, you may see your score drop a few points if you ever decide to cancel a credit card

Hard Credit Checks

As discussed, credit bureaus also keep track of how many hard credit checks borrowers accumulate over time. The more hard credit checks you accumulate, the more your credit score may suffer. 

Debt-to-Income Ratio

Your debt-to-income ratio refers to how much money you make compared to how much money you owe. Debts that are included in your debt-to-income ratio can include loans, credit card balances, student loans, etc. 

Mix of Credit Accounts

Your mix of credit accounts refers to the different kinds of financial accounts you have open and active. Some financial accounts that credit bureaus track are: 

Improving Credit After Hard Credit Inquiries From Apartment Rentals

Trying to help your credit bounce back after a hard credit check from a rental application? Below are a few things you can do to improve your overall credit. 

Focus on Big Debts

One way to boost your credit score is to knock down your debt-to-income ratio and work on paying off big debts. Start with tackling high-interest debts like credit card balances, and work your way down. You may also start with your highest balance and work your way through your debt that way.

To pay off your debts and loans faster, try to pay more than your minimum amount due each month. Paying off your debts this way will not only help make the process faster, but it can also help you save money on interest charges along the way! 

Keep Making Monthly Payments

Consistency is key when it comes to building and maintaining a good credit score. Stay consistent with making payments on your bills, loans, and other financial obligations. If you have trouble remembering to make your payments on time, try signing up for automatic payments, so your finances are taken care of systematically. That way, you can relax knowing you are current on all your bills without having to remember to make manual payments throughout the month. 

Stay Organized With a Budget

If you do not have one already, create a monthly or yearly budget and stick to it. To start, write down all the bills you have to pay when renting an apartment. These bills may include utilities, insurance, potential parking costs, as well as your monthly rent payments. Having a budget you can rely on is a great way to keep your finances in order and avoid financial mishaps such as overspending or account overdraws. 

CreditNinja: Apartment Applications and Credit Scores

Applying for an apartment can hurt your credit, but there are steps you can take to minimize the damage and keep boosting your score. At CreditNinja, we understand the importance of credit scores. That’s why we offer various information articles on credit. You can learn the average credit score after a Chapter 13 discharge, how to improve your payment history, and much more!

References: 

  1. Average U.S. FICO® Score | FICO
  2. How Do Credit Inquiries Affect Your FICO Score? | myFICO
  3. Homeowners vs Renters Statistics [2022] | iPropertyManagement
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