Apartment Living

How Do Apartment Applications Affect Your Credit Report?

How Do Apartment Applications Affect Your Credit Report?

When you apply to rent an apartment, prospective landlords may pull up information on you including your criminal history, renting history, and credit report. Younger and newer renters tend to have lower credit scores than other age groups, so even college graduates earning plenty of money at their first jobs may worry disproportionately, as compared to other factors, about how their credit report affects their apartment application. Making matters worse is that your credit score is determined in part by the number of hard inquiries made into your credit – in other words, every time a prospective landlord pulls up your info, it impacts your credit score. Learn all about how apartment applications affect your credit report below.

The two types of credit inquiries

To understand how your rental applications might affect your credit score, it’s important to distinguish between the two types of credit inquiries. The first type is called a soft inquiry. This term describes an inquiry for which a business checks your credit report without your consent to pre-screen you for special services, offers, or products. 

If this sounds fishy, know that it’s relatively impactless – in fact, it’s how banks decide whether to send you those frequent unsolicited letters offering you deals on loans, new credit cards, and more. In other words, any time a bank extends you an unsolicited offer, it means a soft inquiry into your credit report has been made, and due in part to the frequency of these inquiries, they don’t affect your credit report. Soft inquiries additionally include any time you request a copy of your credit report or give a potential employer your consent to view your credit report.

The second type of credit inquiry is called a hard inquiry or hard check. This is the category of concern as you apply for apartments. Hard inquiries describe credit checks conducted after you apply for any form of credit.

Is a credit check with a landlord a hard check on your credit report?

Yes, a credit check with a landlord is a hard check on your credit report. When a landlord looks into your credit score, it counts as a hard inquiry because when you rent an apartment, you set up a legal arrangement to borrow a piece of property from someone – an arrangement analogous to having a certain amount of money available to use at your leisure on a credit card or in the form of a business or personal loan. 

How do landlord hard inquiries affect my credit score?

Hard inquiries can comprise as much as 10 percent of your credit score. This means that with every apartment for which you apply – and, therefore, with every landlord who checks your credit score – you put your credit score at risk of decreasing by a few points. A negligible change in your credit score isn’t in and of itself a cause for concern, but if too many hard inquiries appear on your credit score in a short timeframe, your credit report may deter potential lenders – landlords included – from working with you. An excess of hard inquiries may suggest that you’re seeking out loans left and right because you have no money.

What can I do to avoid this problem?

In some cases, credit bureaus will consolidate hard inquiries that come from similar institutions or people into one inquiry, a move that will certainly benefit your credit score. Since this isn’t always the case, if you’re worried about your credit report, then an especially easy way to avoid this issue is to only apply for apartments you’re certain are right for you. Narrow down your list of 10 potential new apartments to just three or four, and you should be fine. If considering your credit score causes you to be more specific about your apartment hunt, then that can only be a good thing.

Published at Tue, 10 Mar 2020 13:10:36 +0000

When Is Your Rent a Tax Write-Off?

If there’s one thing that most people living in rental apartments can agree on, it’s that the monthly rent tends to feel like a hefty financial burden. Starting your lease at certain times of the year is one way to help lower your rent, but some renters can use their rent payments to save money in other ways. It’s possible that you qualify to write off your rent when you file your taxes, and if you do, that means you’ll be taxed on less of your annual income than you would otherwise, potentially resulting in long-term savings. Here’s how to know when your rent is a tax write-off that can keep your bank account way more flush.

Is your rent usually a tax write-off?

The simple answer is no: Your rent is not usually a tax write-off. If you, like many renters, use your apartment simply as a home – a place to store your belongings, make your own, and sleep safely and soundly every night – your rent is not a tax write-off. But that doesn’t mean your rent is never a write-off.

When is your rent a tax write-off?

Your rent may qualify as a tax write-off if you use part or all of your home for trade or business. In less jargon-heavy terms, this statement means that if you work from home and are self-employed, then whatever space you use within your apartment for your work may be counted towards your home office deduction on your tax return. This space could be as small as a desk in your bedroom or as large as an entire room that you use solely as an office or workspace and – this is key – never for recreational or non-business purposes.

How does using your rent as a tax deduction work?

According to guidelines from the IRS (Internal Revenue Service, the federal agency that oversees tax collection), you must be able to prove that you conduct business primarily from your apartment. This means that you use your apartment as a home office where you meet with your patients, clients, or customers. You must also be able to prove that whatever portion of your apartment you use as your home office is used solely for business.

Can you always write off your rent if you work from home?

Formerly, employees of a business who worked from home could write off their rent on their taxes. This is no longer the case – due to recent tax reforms, only self-employed individuals who work from a home office and plan to file a Schedule C tax form can write off their rent on their taxes.

Can you write off all your rent on your taxes?

The home office deduction does not quantify the entirety of your rent as a tax deduction. Instead, you’ll claim merely a portion of your rent as a deduction. There are two ways to determine the proper amount that you can write off.

The first of these methods is to deduct five dollars per square foot of home office space, with a maximum home office size of 300 square feet. The second – and more accurate – method involves tallying all your household expenses such as utilities and renters insurance. The IRS accepts either method, but you cannot switch your method from one to the other during the same tax year.

What else should I know about writing off my rent on my taxes?

To properly write off your rent on your taxes, you’ll need to file Schedule C on the IRS Form 1040. You’ll also complete and submit Form 8829. If you’re confused or worried about properly writing off your taxes (or worse, getting audited by the IRS), many experts recommend hiring an accountant instead of doing it yourself with tax preparation software. No matter which route you go, be honest about your expenses and home office size – that’s the fastest way to avoid an audit.

Published at Fri, 06 Mar 2020 15:34:52 +0000