Does a Rental Application Hurt Your Credit Score?

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Looking for a new apartment to rent can be exciting. But, it can also be stressful if you’re worried about how the application process will affect your credit score. In some cases, applying for a rental can hurt your credit score but not always. If a landlord requests a hard credit check this can negatively impact your credit score. Your score can also be affected once you secure a rental if you fail to make your monthly payments on time and your landlord reports it to a credit bureau. 

How Does Applying for Rentals Affect Your Credit Score?

Before we discuss how applying for rentals can affect your credit score, let’s clarify what your credit score is. Your credit score is a three-digit number ranging from 300 to 850 that represents how well you manage credit and how likely you are to pay your bills on time. The higher the score, the more attractive you look to potential lenders. Lenders, landlords, and even future employers can use this number to determine if you’re a good candidate for a loan, an apartment, or a particular job. 

Whether or not your credit score is affected when you’re applying for a rental depends on the documentation requested. If a potential landlord asks for a hard credit check to determine if you are a trustworthy applicant, this can hurt your credit score in the short term. If a soft credit check is requested, you can provide the landlord with your own copy of your credit report (which you can access through Borrowell), this won’t impact your credit score. 

While it’s standard practice for landlords and rental agencies to ask for your credit score as part of a background check, it isn’t mandatory. If you have your credit report available to give to potential landlords who want to see your credit score, you might be able to avoid a hard credit check. You can offer to provide your credit report to your landlord to fulfill their requirements and to avoid having a hard credit check.  

Why Should You Avoid Multiple Apartment Applications?

Typically, it’s a bad look to have multiple hard credit inquiries in a short amount of time. This can make you appear desperate for credit which can raise red flags for lenders. Multiple credit inquiries can also negatively impact your credit score. Remember, each time a hard credit pull is requested your score can drop a few points temporarily. However, there are exceptions to this rule. 

According to Equifax, if you’re shopping for a mortgage or a car loan, multiple inquiries are typically counted as one if performed for the same purpose within a certain period of time. The exact amount of time can vary depending on the specific credit scoring model used but it is typically between 14 to 45 days. This allows you to apply for multiple loans without being penalized each time there’s a hard inquiry. Unfortunately, this exception does not apply to multiple hard inquiries for rental applications. As a result, you’ll want to avoid applying for numerous rentals if they require a hard credit check. 

There are a few things you can do to avoid lots of hard credit checks during the rental application process. First, do your homework. Research where you want to rent and have a good idea of exactly what you’re looking for. Only apply for rental properties that you are truly interested in. 

Second, if a landlord requests a credit report, ask if you can provide it on your own instead of having a hard pull performed. Remember, when you request your own credit report from a credit bureau (Equifax or TransUnion) or a company like Borrowell, this counts as a soft inquiry. You can bring your credit report when you go to view an apartment so it is ready and available. 

Are Apartment Credit Checks Hard or Soft Checks?

An apartment credit check can be hard or soft, it depends on the criteria the landlord or property manager has established. If a credit check is requested, you can ask the landlord if a hard inquiry is necessary or if you can provide them with your credit report. Before a landlord can perform a credit check, they must get your consent.  

What is a Hard Credit Check?

If you’ve ever applied for a credit card, personal loan, or even a utility, you’re probably familiar with a hard credit check. A hard credit check is typically required when you apply for new credit to determine if you are eligible to borrow money. 

In the case of apartment rentals, a landlord might request a hard pull to determine if you’re a trustworthy candidate. A landlord might want to review your payment history to see if you’re likely to miss a payment. They can also review your credit report to see your current debt load, if you have any accounts in collections, or if you’ve been through a bankruptcy or consumer proposal. 

Any hard inquiries performed will show up on your credit report. This allows lenders to see how many times you’ve applied for new credit. Hard inquiries will typically impact your credit score and can stay on your credit report for up to 36 months.  

What is a Soft Credit Check?

If you’ve ever requested your credit report from Borrowell or one of the credit bureaus in Canada, you’re familiar with a soft credit check. 

A soft credit check is when your score is reviewed for informational purposes and not for lending purposes. A soft credit check does not impact your credit score. 

Does Paying Rent Affect Your Credit Score?

Until recently, paying rent didn’t affect your credit score. However, an initiative from the Landlord Credit Bureau (LCB), a rent reporting agency, is helping to change this. The LCB teamed up with Equifax, one of Canada's two main credit bureaus, to enable the sharing of rental payment information. 

Starting in 2020, Canadian landlords can report their tenants’ payments, or lack of payments, to the LCB. From here the LCB reports to Equifax and the information ends up on the tenant's credit report. 

This can have a positive impact on the credit score of renters who consistently pay their rent on time. On the other hand, those who don’t make their rental payments could see their credit score negatively impacted.

Since the LCB doesn’t currently have a partnership with TransUnion (the other major Canadian credit bureau), rent payment information will not show up on your TransUnion credit report. 

How to Report Your Rent to Build Credit 

As a tenant, if your landlord doesn’t report rental payments and you want them to, you can suggest they register with the LCB. The LCB service is available in all provinces except Quebec. If your landlord is already using a rental reporting service, you might not have a say in whether or not you want to participate. In this case, make sure you are paying your rent on time, every time. 

You can also sign up for Borrowell’s Rent Advantage program. Borrowell has partnered with Equifax to give tenants the opportunity to report their rental payments. The best part, you don’t need your landlord’s approval to participate. Borrowell’s Rent Advantage program uses electronic bank records to verify payments, removing the need for your landlord to sign up for the program.  

Do Late Rent Payments Hurt Your Credit Score?

If you are late paying your rent or you miss a payment, your landlord can choose to report this to the credit bureaus. If you have a good reason as to why your rent payment was late, you can contact the credit bureau to include the reason on your credit history. This way, when future landlords review your credit report they can see your explanation. 

If your landlord has registered with the LCB, or you sign up for Borrowell’s Rent Advantage program and your rental payments are consistently being reported then any late payments can affect your credit score.

Reporting your rental payments can be a great way to improve your credit score, but only if you’re consistently making your payments on time. Just like a credit card or other loan payment, missed or late payments can negatively affect your credit score. With payment history accounting for the largest portion of your credit score, it's important you stay on top of it.  

The Bottom Line

A rental application can hurt your credit score if a landlord or rental agency requests a hard credit check as part of the process. If multiple hard credit checks are required in a short period of time, this can further damage your score. Once you find a rental, any late or missed payments can also negatively affect your credit score if you or your landlord are reporting payments to a credit bureau. On the other hand, if you consistently make your rental payments on time, this can positively impact your credit score.