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Essential Credit Checks for Landlords: Protect Your Property with Confidence 13 Jul 2023

Essential Credit Checks for Landlords: Protect Your Property with Confidence

As a landlord, it's crucial to ensure that you are letting your property to reliable and responsible tenants. One of the best ways to assess a potential tenant's financial situation is by conducting a credit check. In this guide, we will cover everything you need to know about credit checks for landlords.

What is a Credit Reference Check?

A credit reference check is a way to evaluate a person's creditworthiness and financial history. This process involves accessing the individual's credit report, which provides information about their credit score, credit history, and financial behavior.

How is a Credit Reference Check Performed?

There are several ways to perform a credit reference check. The most common method is to use a credit reference agency, which can provide you with a detailed report on a potential tenant's credit history.

What Does a Credit Reference Check Show?

A credit reference check can provide you with valuable insights into a potential tenant's financial situation. This includes information about their credit score, credit history, outstanding debts, and payment behavior.

Can You Look at Your Own Credit Report?

Yes, anyone can request a copy of their credit report from a credit reference agency. This is a great way to ensure that there are no mistakes or inaccuracies on your credit report.

Tenancy Credit Checks

Credit checks are an essential part of the tenant screening process. They can help you assess a potential tenant's financial situation, which is crucial when making a decision about who to rent your property to.

Credit Referencing for Tenants

Tenants can also benefit from credit referencing. A good credit score can increase their chances of being accepted for a rental property.

Why Should Landlords Carry Out Credit Reference Checks?

Credit reference checks are essential for landlords as they provide valuable information about a potential tenant's financial situation. This information can help you make an informed decision about who to rent your property to.

How to Conduct a Credit Reference Check on Your Tenants

Conducting a credit reference check is a simple process. Here are the steps you need to follow:

  1. Obtain the tenant's consent to conduct a credit check.
  2. Choose a credit reference agency to use.
  3. Provide the tenant's details to the credit reference agency.
  4. Wait for the credit report to be generated.
  5. Review the credit report and make an informed decision about whether to rent your property to the tenant.

How to Credit Check a Tenant?

To credit check a tenant, you will need to provide their personal details to a credit reference agency. This will include their name, address, and date of birth. The agency will then provide you with a detailed credit report.

Credit Referencing Checks for Tenants on Universal Credit and Housing Benefits

If a tenant is on Universal Credit or housing benefits, it's still important to conduct a credit reference check. This will provide you with valuable information about their financial situation and help you make an informed decision about whether to rent your property to them.

How Much Do Credit Reference Checks Cost?

The cost of credit reference checks can vary depending on the credit reference agency you use. However, the cost is usually between £10 and £50 per tenant.

Landlord Credit Check UK

In the UK, there are several credit reference agencies that provide landlord credit checks. These include Experian, Equifax, and TransUnion.

Can Tenants Tell When You've Done a Credit Reference Check?

No, tenants cannot tell when a credit reference check has been performed. However, it's important to obtain their consent before conducting a credit check.

Credit Checking Tenants

Credit checking tenants is an essential part of the tenant screening process. It can help you assess their financial situation and make an informed decision about whether to rent your property to them or not. 

However, it's important to remember that a poor credit score doesn't necessarily mean that a tenant is a bad tenant. There could be many reasons why someone has a low credit score, such as being a victim of identity theft or going through a difficult financial period in their life. 

That's why it's important to look at other factors, such as their rental history, employment status, and references, to get a more complete picture of their suitability as a tenant. By conducting a thorough tenant screening process that includes a credit check, you can minimize the risk of renting to tenants who may have trouble paying their rent or cause other issues during their tenancy.

Letting to Tenants with Bad Credit Scores

While credit reference checks are an important tool for landlords to screen potential tenants, it's important to consider that some applicants may have a bad credit score. In these cases, landlords need to carefully evaluate the risks of letting to tenants with poor credit scores.

Exploring the Risks of Letting to Tenants with Poor Credit Scores

Letting to tenants with bad credit scores can increase the risk of rent arrears and even evictions. However, it's important to consider each case individually and not to automatically reject applicants with bad credit scores.

When evaluating the risks of letting to tenants with poor credit scores, landlords should consider factors such as:

  • The reasons behind the bad credit score: For example, if the applicant had a temporary financial setback, such as losing their job, but has since recovered and is now financially stable, they may be a good candidate despite their bad credit score.
  • The tenant's current financial situation: If the applicant has a steady income and is able to afford the rent, despite their bad credit score, they may be a good candidate for the rental property.
  • The tenant's rental history: If the applicant has a good rental history, with no previous evictions or late rent payments, this may outweigh their bad credit score.

How to Evaluate the Risks of Letting to Tenants with Bad Credit Scores

To evaluate the risks of letting to tenants with bad credit scores, landlords can consider the following steps:

  1. Review the applicant's credit report and credit score: This will give landlords an idea of the applicant's credit history, including any missed or late payments, defaults, or CCJs. Landlords can also use this information to calculate the risk of letting to the applicant.
  2. Consider other factors: As mentioned, landlords should also consider other factors, such as the applicant's rental history, current financial situation, and the reasons behind their bad credit score.
  3. Use a guarantor: If the landlord is still unsure about letting to an applicant with a bad credit score, they can consider using a guarantor. A guarantor is someone who agrees to pay the rent if the tenant is unable to do so. The guarantor should have a good credit score and be financially stable.

Alternatives to Credit Checks for Landlords

While credit reference checks are a common tool used by landlords to screen tenants, there are other options available. These include:

  1. Employment references: Landlords can ask for references from the applicant's employer to verify their income and employment status.
  2. Rental references: Landlords can also ask for references from previous landlords to verify the applicant's rental history and to check for any previous evictions or late rent payments.
  3. Bank statements: Landlords can ask for bank statements from the applicant to verify their income and to check for any regular payments that may be indicative of financial stability.

Guarantor Credit Checks

If a landlord decides to use a guarantor, it's important to conduct a credit reference check on the guarantor to ensure they are financially stable and able to pay the rent if the tenant is unable to do so.

Should You Credit Check a Guarantor?

Yes, landlords should credit check a guarantor before agreeing to let to the tenant. This will help to ensure that the guarantor has a good credit score and is financially stable.

The Role of Guarantors in the Rental Market

Guarantors play an important role in the rental market, as they provide a level of security for the landlord. However, it's important to choose a guarantor carefully and to ensure they are financially stable.