Credit Reports: Soft vs Hard check

Being a landlord is tough and choosing the right tenant is crucial for the success of your rental property. One of the most important aspects of selecting a tenant is evaluating their creditworthiness. Soft credit checks can be an effective way to evaluate potential tenants, but it is important to understand the difference between soft and hard credit checks and what information they provide.

What are Soft Credit Checks?

A soft credit check is a type of credit inquiry that does not affect the credit score of the individual being checked. Soft credit checks are usually performed by landlords, employers, or lenders who are trying to evaluate the creditworthiness of a potential tenant, employee, or borrower.

Soft credit checks are also known as “soft pulls” or “soft inquiries” and are commonly used during pre-qualification or pre-approval processes. Soft credit checks do not provide as much detailed information as hard credit checks, but they do provide a snapshot of an individual’s credit history, including their credit score, current debts, and payment history.

What are Hard Credit Checks?

A hard credit check, on the other hand, is a type of credit inquiry that can affect an individual’s credit score. Hard credit checks are usually performed by lenders when an individual applies for credit, such as a mortgage, credit card, or personal loan.

Hard credit checks provide a more detailed view of an individual’s credit history and typically include information such as their credit score, payment history, outstanding debts, and recent credit inquiries. Hard credit checks can stay on an individual’s credit report for up to two years and can lower their credit score by a few points.

What Information Do Soft Credit Checks Provide?

Soft credit checks provide a snapshot of an individual’s credit history, including their credit score, current debts, and payment history. They do not provide as much detailed information as hard credit checks, but they can give landlords a good idea of a potential tenant’s creditworthiness.

A credit score is a three-digit number that represents an individual’s creditworthiness. Credit scores range from 300 to 900, with higher scores indicating better creditworthiness. Generally, a credit score of 650 or higher is considered good, while a score below 600 may be considered poor.

Current debts refer to any outstanding loans or credit card balances that an individual has. This information can help landlords determine if a potential tenant has too much debt and may struggle to make rent payments.

Payment history refers to an individual’s track record of making on-time payments. This information can help landlords determine if a potential tenant is reliable and will make rent payments on time.

Is It Enough to Make a Tenancy Decision?

Soft credit checks can be a useful tool for evaluating potential tenants, but they should not be the only factor considered. Landlords should also consider other factors, such as employment history, rental history, and personal references.

While a soft credit check can give landlords a good idea of a potential tenant’s creditworthiness, it does not provide a complete picture. For example, a soft credit check may not reveal any recent missed payments, which could be a warning sign of financial trouble.

In addition to conducting a soft credit check, landlords should also consider requiring a security deposit or co-signer, especially if a potential tenant has a lower credit score or a history of missed payments. If you still have any doubts about your tenants ability to pay, you can also consider a rent guarantee for extra peace of mind.

Conclusion

Soft credit checks can be a useful tool for evaluating potential tenants, providing landlords with a snapshot of an individual’s credit history, including their credit score, current debts, and payment history. However, landlords should also consider other factors, such as employment history, rental history, and personal references, when making a tenancy decision.

It is also important to note that soft credit checks do not provide as much detailed information as hard credit checks, and should not be used as the only factor in making a tenancy decision. 

Did you know you purchase Credit Reports directly from the Tenantcube Website and Landlord Software solution?