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landlord credit & referencing 2020

Tenant Credit Checks 

The British Landlord Association tenant credit check service for landlords is a tenant screening process that uses various credit reference agencies to ascertain if the prospective tenant has a poor credit history.

Letting agents and landlords should always do a credit check to see if your prospective tenants have had problems paying bills in the past. Rental payments default indicate that a tenant is likely to pay the rent on time.

The British Landlords Association offers members and non-members a comprehensive tenant credit screening service that includes tenant referencing and Right to Rent checks.

If a tenant proposes a guarantor, the guarantor should also be subject to a credit check.

Private landlords and letting agents should assess if prospective tenants can pay their rent and check if they are suitable to live at their property.

This can be done by requesting a tenant reference from the previous landlord, which is like submitting references when applying for a new job and shouldn’t be a cause of concern for the potential tenant.

It is always a good idea to obtain references and meet the prospective tenants in person if you are managing the property yourself.

What is included in a landlord credit report?

Credit Reference Agencies check the following information:

  • Employment verification
  • Income references
  • ID verification
  • Previous landlord’s rental payments behaviour
  • References affordability calculation
  • Background Linked Address
  • previous addresses
  • Identity & Fraud Information CCJ’s
  • County Court Judgements
  • Right to Rent Check
  • Bankruptcy
  • Electoral Roll check
  • Alias name search
  • Bank references if necessary
  • The Credit report also includes credit references for the right to rent legislation

Credit & Reference FAQ

How to obtain consent from the tenant to conduct referencing?

Use our tenancy application, or you can use any other document that gives you consent from the tenant to carry out creditworthiness background checks.

As a backup, our credit & referencing checks also request consent from the prospective renters.

Can I download free reference templates for my use?

Yes, you can, The British Landlord Association provides a host of various free templates to download.

What happens next?

Once you have the consent, you can order the credit & reference report.

What info do I need?

Most of the information is sought directly from the tenant, reducing stress and time for the landlord. You will see all the tenant’s information once the report is ready.

Our partner platform will require the following information:

  • Tenant full name
  • Telephone number
  •  Email address
  • Address of the let property
  • The rent you are charging PCM/Week
  • If a guarantor is proposed, the guarantor’s name, email address and telephone number
  • Amount deposit to be paid by the tenant, if applicable
  • Are the bills included?

What steps do I have to go through on your website?

Buy a credit & reference report, and then after payment, you will be directed to the form where you enter the necessary information for the prospective tenant(s).

Can I have the credit check done without referencing as well?

No, the report would be incomplete; both are done simultaneously.

How long does it take to do a credit check?

It usually is done within 24 hours; however, it mostly depends on the prospective tenant how quickly they will respond to the information requested by our platform.

Will you give a credit score or results, and how do I use them to decide on a tenant?

Yes, there is grading, so you can choose to accept or decline the tenant once you have read the report.

What is tenant screening?

Tenant screening is a process that landlords and lettings agents use to check if the tenant has a bad credit history.

The tenant screening process verifies a prospective tenant’s true identity to check; they are who they say they are and assess the likelihood they will pay the rent when it falls due.

The tenant screening process also assesses the integrity of the potential tenant with reference checks from previous landlords. This may give you peace of mind; if they are likely to look after the property and comply with the tenancy obligations.

At the end of a series of checks, including identity, employment and income verification, you can make an informed decision about whether to accept the tenant’s application for a tenancy.

How to screen potential tenants?

Tenant background checks can be done manually by verifying the prospective tenant’s information on their tenancy application form.

The affordability assessment can be quickly checked by requesting employment references to verify income and bank references.

However, checking if the tenant has CCJ’s and bankruptcy can take a long time to do manually unless you use a credit ratings company.

This usually includes contacting individual employers and referees and discussing a tenant’s suitability. The most cost-effective and method is to use The BLA tenant screening and reference checking services.

Tenant Credit reports for landlords by the British Landlord Association are sourced from Vouch, a credit reference agency.

What happens if my tenant fails a Credit Check?

If you find your prospective tenant fails a credit check. There are several reasons why a tenant might have a low credit rating. However, you might still be able to offer them the tenancy in certain circumstances.

Can a tenant provide their own credit reports?

Yes, a tenant can do their own credit check and show you a copy of the credit file. However, you should verify that the credit reference agency is one you recognise, and you should verify the report’s contents.

You can insist on doing the checks, or your tenant can also get a free assessment at Experian in under 5 minutes. But this may only reveal part of the picture of the renters actual financial standing.

Do I need to credit check a guarantor?

Suppose you consent for your tenant to propose a guarantor. In that case, the guarantor is putting themselves forward as someone who would pay the rent if the tenant could not.

So, you need to know that they could afford it just as much as you need to know the potential tenant could. But, again, you will need their consent for any checks just as you would with your tenant under GDPR.

Despite the best efforts of landlords, there continue to be bad tenants who flit from one home to another with no intention or ability to pay their rent.

So, it is well worth paying a small fee to do a credit check before signing the tenancy agreement and having peace of mind.

What is creditworthiness, and how can it be determined?

Simply put, creditworthiness is the ability of your tenant to pay you, which is why it is important to understand how to determine creditworthiness before granting a tenancy or a lease.

To determine a renter’s creditworthiness, you need to understand their reputation for paying on time and their capacity to continue to do so.

Those factors include their income and outstanding obligations. You also need to understand the renter’s future employment prospects within their industry that could affect their ability to pay you.

What could negatively affect tenants credit rating?

Most of the factors above will affect a renter’s credit score and subsequent eligibility for renting a property. For example, if you have a poor payment history, missed payments, and have court records such as CCJs, your score could be negatively impacted.

Lenders are also likely to look at a renters ‘credit utilisation’ – this is an assessment of how much they owe and how much available credit they are currently using.

If they owe a lot of money and have used up most of their credit, lenders could view this negatively. In addition, if the earnings combined with the amount, they owe make the affordability of what you are asking for unattainable, this could also negatively impact.

As mentioned above, the length and volume of your credit history are also essential. If you do not have any history, lenders will find it challenging to assess you, and therefore your associated score might be below.

In summary, there are plenty of ways you can improve your credit score while renting. If you are sensible with your money and understand what could affect your credit rating, there is no reason you won’t find applying for credit or tenancy relatively straightforward.

Some of the main credit reference agencies are:

Experian

ClearScore

Equifax

Credit Karma

To order a British Landlord Association tenant credit report click here to order.