How to Read a Tenant Referencing Report

When you’re reading a tenant referencing report for the first time, it can be tricky to know where to begin and what to focus on.

Choosing the right tenant is often the toughest part of renting out your property, but understanding how to interpret a referencing report can make this decision much easier.

Here you’ll find out how to read and understand each section of an OpenRent comprehensive referencing report, so you can make an informed choice about your tenants.

So, where do you start? Begin by clarifying what you want to achieve from the referencing process. For most landlords, the key concerns are:

1. Will the tenants be able to pay the rent? 
2. Will they look after the property and be considerate of the neighbours?

Will the tenants be able to pay the rent?

The main sections of the referencing report to focus on are Affordability and Credit Check.

Affordability

This section tells you whether the tenant can afford the rent and how they plan to pay it.

We verify affordability using open banking and/or referees. These methods help us check that the applicant has had a stable income for a reasonable period before the tenancy starts.

Open banking and referees allow us to confirm income from various sources, such as salary, benefits, pensions, and investments.

Affordability is generally assessed with the rent needing to be less than about 35-40% of the tenant’s income to pass the check.

What does ‘Passed in Conjunction’ mean?

In the UK, most tenancies are joint tenancies, meaning that multiple people are named on a single agreement. This setup means that any tenant or guarantor can be asked to cover the full amount owed if needed.

Each tenant will be referenced for their share of the rent. However, even if a tenant can’t afford their portion alone, they may still pass the referencing ‘in conjunction’ with the other tenants if, together, they can cover the total rent.

Credit Check

The credit check section gives you insight into each tenant’s credit history and their reliability in making payments on time.

OpenRent works with Equifax, a top credit agency, to assess a tenant’s creditworthiness and to check for any recent negative events, like county court judgments (CCJs), bankruptcies, or insolvencies.

If the report shows any of these issues, it could mean the tenant has had financial troubles or difficulties managing money in the past.

While this doesn’t necessarily indicate future problems, it’s important to be aware of it. We recommend discussing any concerns with the tenant directly.

Equifax also provides a credit score summarising the tenant’s financial risk. This score ranges from low to high, helping you understand the level of risk involved.

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What does ‘Insufficient Information Provided’ mean?

Sometimes, you might see ‘Insufficient Information Provided’ in the credit check section. This doesn’t automatically mean the applicant has bad credit or will be an unreliable tenant.

It just means that Equifax couldn’t find their credit record, so they couldn’t confirm their credit history.

This can happen for various reasons, like if the tenant has recently moved to the UK and doesn’t yet have a credit footprint here.

Will tenants look after the property?

Although a tenant referencing report can’t guarantee that a tenant will care for your property or be considerate to neighbours, it can give you a clearer idea of their behaviour and character.

Tenant identity check

This is a critical step to watch out for. If a prospective tenant isn’t who they claim to be, it’s a major red flag. The credit agency performs several checks to verify the information the tenant has provided.

We’ll ask the applicant to list their most recent addresses, and Equifax will compare these with data from sources like the Electoral Register, utility providers, and financial records.

Their date of birth will also be cross-checked. If all these checks are clear, it’s a good sign that the tenant is genuine.

Plus, we’ll ask tenants to provide a form of ID, which can be another practical way to verify their identity.

Keep in mind, though, that providing a form of ID for referencing purposes doesn’t replace the Right to Rent check. You can find our full guidance on fulfilling your Right to Rent obligations here.

Previous landlord reference

If the prospective tenant was renting at their last address, we’ll ask them to provide a reference from their previous landlord or letting agent.

We’ll check if their tenancy was satisfactory and include details in the tenant reference report, such as whether the rent was paid on time and if the property was well-maintained.

Remember, at the end of the day, the decision on whether to proceed is up to you. As a self-managing landlord, you will have had the benefit of meeting your new tenants upfront, and trusting your instincts is an important part of the process.

Even if the tenant doesn’t pass the referencing, you have a few options. You can ask them to provide a guarantor, request rent in advance, or decide to move forward as is if you’re comfortable.

When deciding whether to ask for a guarantor, remember that if the tenant has failed comprehensive referencing they will need a guarantor to pass in their stead for the tenancy to be eligible for rent guarantee insurance.

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