How Renting Can Impact Your CreditAdvertiser Disclosure by Lucy Lazarony
When you rent a home, apartment or townhome, your credit is affected in a number of ways. Let’s take a look at what you can expect when you’re looking to rent.
Does Paying Rent Build Credit?
In some cases, paying your rent on time may help you build credit. For your positive rent payment history to be included on your credit reports from Experian and TransUnion, your landlord must report your rental history data to them. There are also various third-party services that can report your rent payment history to the credit reporting agencies.
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How Do Rent Payments Appear on my Credit Report?
Rent payments show up like an auto loan (if you have a defined lease term), or like a charge card (when you pay month-to-month). You’ll get a leg up against other applicants since your good rental history will also show up on rental screening products offered by the bureaus. Finally, scores like VantageScore are now incorporating rental payments in their models.
Credit & Background Checks for Potential Tenants
When you fill out an application as a potential tenant, you may have to agree to a consumer credit check. A potential landlord also may check your rental history, your driving record, your criminal and civil history, as well as verify your employment.
Credit Scores Landlords Use
Many landlords check a potential tenant’s credit reports and review their credit scores before agreeing to rent out an apartment. They use specialty consumer credit reports from First Advantage, CoreLogic SafeRent and Tenant Data Services to screen potential tenants. These companies by law must provide you with copies of your report once a year upon request.
If your application to rent a place to live is turned down due to information in a credit report, the landlord who rejected you as a tenant must provide you with a notice that describes your rights and gives you instructions for requesting a free copy of the credit report accessed in the decision.
Be sure to request a free copy of this report. For a free look at two of your credit scores, use Credit.com’s Credit Report Card.
Hard Pull Versus Soft Pull of Credit Data
When you give permission for a landlord to request a copy of your credit report, you’ve initiated a credit inquiry. This type of credit inquiry, often referred to as a hard inquiry, does affect your credit score. However, there are other types of inquiries into your credit report — such as a credit card company checking your credit before sending you a pre-approved credit card offer — that do not affect your credit score. These types of inquiries are referred to as soft inquiries and include a consumer’s own request for copies of their credit reports.
Credit inquiries when applying for a rental apartment are usually recorded by a credit reporting agency, as a type of real estate-related inquiry, according to myFICO.