Landlord's Guide to Tenant Credit Checks
Posted on 1st June 2022
Credit checks are a vital part of the renting process.
They help landlords make informed decisions about who to rent out their properties to and ensure that they are not letting property at risk by renting it to someone with an adverse credit history.
However, many people don't understand how these checks work, or what they mean for tenants - so we'll discuss them in detail below!
There are several different credit checks that landlords need to carry out to rent out their property. The most common ones are:
- Credit score check: These measures how likely someone is to repay their debts on time.
A high credit score means the tenant is likely to be reliable and has a good history of debt repayment.
Low credit score means they are likely to be unreliable and have a history of defaulting on debts.
- Landlord's search: This check provides information about the tenant from their previous landlords, which gives you an idea of whether they will be reliable tenants who keep up with rental payments.
If there is no record of them paying rent on time, this could be a sign that they may not be good payers.
- Credit reference agency check: This is carried out by credit reference agencies. It provides landlords with detailed information about the tenant's credit history, including any County Court Judgments (CCJs) or bankruptcies that they may have.
This check is important as it can help landlords gauge how risky it would be to rent to a particular tenant.
- Right to Rent immigration check: This is a government requirement that all landlords must carry out to ensure that they are not renting property to anyone who does not have the right to live in the UK.
- Tenant's immigration status check: This helps landlords to identify any tenants that may have the right to live in the UK, but not necessarily those who have been granted indefinite leave.
- Tenancy referencing: This is a reference check carried out on the tenant, which includes any previous landlords and employers. It can provide crucial information about how reliable they have been in their jobs or previous tenancies - if your tenant has missed payments before, it could be a sign that you're not going to get paid on time!
- Employment status check: This helps landlords to confirm whether the tenant is employed and their current salary, which will give you an indication of how much rent they can afford.
- Bankruptcy/Exclusion search: Landlords should carry out a bankruptcy search before renting out their property to find out if someone has been declared bankrupt within the last six years. An exclusion search will show if the tenant is currently subject to a bankruptcy restriction order or debt relief order.
All these checks are important in helping landlords make an informed decision about who to rent their property to. If you don't carry out all the necessary checks, you could be taking on unnecessary risk and could face legal action if the tenant doesn't pay their rent.
It's therefore important to make sure you're using a credit reference agency, which can provide you with all the information you need about a tenant's credit history.
And remember, if you're not sure which checks to carry out, or how to go about getting them approved, get in touch with your local credit reference agency for help!
If you need further information please call us on 0116 340 9989
or email firstname.lastname@example.org.
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