As a landlord, you must trust your tenant to pay the amount of rent owed each month. This payment in exchange for housing is the foundation of your business and relationship with your tenants.

In most cases, however, landlords do not know the people they are renting out to. So how can you be sure this person will be able to uphold their end of the agreement? This is where credit inquiries come in. A tenant’s credit is a great indicator of their ability to pay debts in full and on time. Credit inquiries can tell you more about a person’s credit history and allow you to better tell whether their ability to pay rent will be an issue.

There are two types of credit inquiries - hard and soft. These inquiries are also sometimes referred to as “pulls”. Both inquiries give you the same information, so what is the difference between them?

Hard credit inquiries are pulls that are typically used when applying for new lines of credit. To run a hard credit inquiry, you should first receive the applicant’s express consent, usually by getting their signature in your rental application. It is very important that the applicant consents to the hard inquiry, as running one without the renter’s knowledge and consent is illegal. These laws exist because hard inquiries have a negative impact on the subject’s credit score. After receiving consent, you can supply your screening service with the applicant’s name, social security number, and current address.

A record of someone’s hard pulls is an indicator of whether they are applying for multiple loans, properties, credit cards, etc. at one time. If your applicant has multiple hard-pulls on a credit report simultaneously, it may be a sign that they are a risky borrower.

One advantage to running a hard credit inquiry is that you only need the applicant’s social security number, name, and address. You do not need to wait for the tenant to give you any additional information. This gives you some more control over the process, and the timeline to obtaining crucial information is relatively quick.

However, be sure to consider the cons of hard credit inquiries as well. In addition to damaging an applicant’s credit score, hard pulls deal with sensitive information like social security numbers, and therefore, an annual inspection is required to ensure that you are compliant with the Fair Credit Reporting Act (FCRA). This inspection is completed by a third-party representative who is approved by the major credit bureaus, lasts around 15-minutes and is non-invasive. It does take some time to be approved after this inspection, typically a few weeks. Inspections must be completed annually.

Soft Credit Inquiries

Soft credit inquiries are not used when applying for new credit as hard inquiries are. Instead, soft pulls are used when you want to check your own credit or are seeking employment, for instance. Like hard inquiries, you still need the consent of the applicant, but the process is different. Applicants are not giving you consent to have their report pulled directly, just to view it.

The biggest advantage of soft pulls is that there is no negative impact on your applicant’s credit score. Although hard inquiries only knock off a few points, those points can add up and can discourage tenants from wanting another pull on their report. Also, the landlord only needs to input the tenant’s email address to receive the report, so there is no on-site inspection required since there is no sensitive consumer data needed.

That being said, soft credit inquiries do require more information given by the tenant. Applicants need to fill out a credit application and answer certain security questions on their end before you can receive their report. This can be somewhat time-consuming, and you’ll lose some control over the process.

Which Is Best for You?

So, what kind of credit inquiry should you use? Hard credit inquiries seem like a hassle—you need an on-site inspection and they hurt the applicant’s credit score. You should keep in mind a notable advantage to hard pulls: the process is much quicker. After receiving permission from the tenant, you only need to provide their social security number, name, and address before you can run the check. Soft pulls are different and require much more information from the applicant to ensure the applicant is really who they say they are.

However, even with this slight advantage, soft inquiries are generally the way to go. Tenants are much less likely to be discouraged from applying, and it is much easier to conduct a soft pull since there are no inspections required. Make sure you do your research before running your first credit report and think twice before choosing a service that conducts hard pulls.

It's probably best to give a definition for "Hard inquiry" before jumping into the details. 

Also, since this article was a couple hundred over the word limit, I suggested some sentences you could cut. Feel free to play around with other options to cut it down - these are just suggestions.