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When you decide to rent an apartment, your credit score is usually a top concern. In a time when a good credit score may make or break your ability to get a home, you might be wondering how apartment renting factors into your credit.
If you’ve ever rented before, you know that the landlord may check your credit report to see if you’ve been reliable in the past – and determine whether you will be a potential risk in the future.
Since rent is often the largest and most essential monthly expense, one would question whether there is any good or bad impact associated with paying or not paying. The short answer is: yes, and there are several ways in which renting a property might affect your credit. If your rent is late, your property manager may report it to the credit agencies or even send it to collections, which can devastate your score.
How Applying for an Apartment Affects Your Credit ScoreHow Applying for an Apartment Affects Your Credit Score
While it’s clear that being behind on rental payments may have a negative impact on your credit, you may be curious about whether or not apartment applications have the same impact on your score as, say, a credit card or loan application.
When you apply for an apartment, the landlord will likely do a credit check, which will appear as a hard inquiry on your credit report and affect your score. However, it doesn’t hurt much; according to Experian, hard inquiries typically stay on your credit report for 25 months, but they usually only affect your credit score for the first 12 months.
But the best part? Multiple apartment applications will only count as one inquiry on your credit report.
Paying Rent Can Improve Your Credit ScorePaying Rent Can Improve Your Credit Score
If late rent payments can hurt your credit score, on-time payments should help, right? In certain instances, timely rent payments may help improve credit by establishing a positive payment history. For that to happen, landlords first have to report it, which often doesn’t happen with smaller private landlords.
Late Rent PaymentsLate Rent Payments
Renters whose payments are late or missed are more likely to have their accounts turned over to a debt collector, which can have a devastating effect on their credit scores. Credit reports do not reflect evictions, although tenant-specific consumer reports may include them with late payments and other negative entries.
The landlord can still report unpaid balances, which will hurt your credit. This includes:
- Late rent payments
- Breaking the lease
- Any move-out fees
If the landlord sues you and a judgment is filed against you, the eviction will also show up in your credit report and damage your credit.
Do Rent Payments Affect a Cosigner’s Credit Score?Do Rent Payments Affect a Cosigner’s Credit Score?
Perhaps you’re wondering whether cosigners would also have a negative impact on their credit scores if payments are late. While it’s obvious that a renter’s credit will take a hit if they don’t pay their bills on time, it’s also crucial to remember that a cosigner’s credit will take a hit just as hard as the renter, despite them not actually living there.
Because of this, anytime the cosigner applies for a rental or line of credit, it will seem as though they are the ones who didn’t pay rent.
The Bottom LineThe Bottom Line
Renting an apartment can affect your credit in several ways, from showing up within the rental history or showing up as a negative mark on the tenant-specific consumer report.
It’s important to keep in mind that:
- Good credit can help you get approved for apartments
- Paying rent on time can improve your credit score and establish a positive rental history
- Failing to pay rent on time (or at all) can damage your chances of being approved for rental homes in the future
- As a cosigner, your credit score will be impacted the same as if you were the renter
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