How Do Landlords and Letting Agencies Do Tenant Referencing?

The tenant referencing process in the UK rental market is often seen as a key step that can determine whether you can successfully rent out your property.

Many landlords are unsure of what actually happens during the referencing process or how the final decision (‘pass’ or ‘fail’) is made for a prospective tenant.

Here we’ll explore how long tenant referencing typically takes and explain the criteria referencing companies use to determine if a tenant is suitable to rent your property.

Many referencing providers also check a tenant’s right to rent as part of their report. For more details on Right to Rent checks and how they work, take a look at our guide here.

1. There are different checks for different tenants
2. What information do tenants need to provide for a reference check?
3. Why would a tenant fail referencing?
4. What if a guarantor is needed?
5. How can a guarantor fail referencing?

Different checks for different tenants

The first thing to understand is that referencing companies will require different information from different tenants depending on whether they are:

1. Employed tenants
2. Self-employed tenants
3. Students and housing benefit applicants
4. Retired tenants
5. Independent means
6. Tenants on benefits

Furthermore, there are different requirements for tenants and guarantors.

Employed tenants

Tenants whose income is from full-time or part-time employment will be asked to provide their employment details and contact information for an employer referee on their application form.

• Referencing providers will always seek verification of employment details for all employed applicants. This will include: start date, position held, salary/earnings and contract type. It’s important to note that verbal references can’t be accepted.
• If the applicant is employed on a temporary employment contract or a fixed-term contract that is due to expire before the end of a tenancy, then a suitable guarantor will usually be recommended.
• If the applicant is an employee of a company that is operating from a residential address, or the employment cannot be verified as genuine, then a suitable guarantor may also be required.
• Tenants must provide a business email address for their referee (which is an email address using a registered domain name that resolves to the company’s website).
• References submitted by the applicant are not accepted – confirmation must come directly from the employer.
• Generally speaking, the tenant’s rent must be no more than approximately 35-40% of their gross monthly income.

Self-employed tenants

Self-employed tenants must be able to demonstrate their income over a 12-month trading period. If they have not been self-employed for one year or more, a suitable guarantor may be required.

• Self-employed income can only be verified by a chartered or recognised accountant in response to the request for information. In the event that the applicant does not use an accountant, some referencing providers may accept a copy of their most recent filed tax return or additional proof of income (including bank statements).
• Tenants must provide a business email address for their referee (which is an email address using a registered domain name that resolves to the company’s website).
• Generally speaking, the tenant’s rent must be no more than 35-40% of their gross monthly income.

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Students and housing benefit applicants

Referencing providers will usually require a guarantor for:

• Students with no employment income
• Tenants who rely on housing benefits to pay the rent

For applicants of this type, we recommend that a guarantor application is submitted at the same time as the tenant application because it will almost certainly be required (more information on this is outlined below).

Retired tenants

Different referencing providers will verify the income from retired applicants in different ways, and may accept any combination of the following:

• Transactions verified using Open Banking
• Annual pension statements
• The last three months’ bank statements
• A reference from their pension administration
• A P60 form

To pass, the tenant’s rent should generally be less than 35-40% of their gross monthly income.

Independent means

Some referencing providers will be able to reference tenants who are paying their rent using savings or through other independent means.

If so, they will usually need to provide UK bank statements showing savings of more than six times the rent for the term of the tenancy.

Tenants on benefits

Income from benefits is sometimes counted in a tenant’s income, depending on the referencing provider.

Some providers will accept Universal Credit, as long as the payments can be verified by Open Banking, while others will only include certain benefits in their affordability calculations, and will require these benefits to be verified using award notices and/or bank statements.

What information do tenants need to provide for a reference check?

As part of any rental reference check, tenants must provide certain documents. With our speedy tenant referencing service, we gather all necessary information and deliver results within one working day.

Address information

Each prospective tenant will be required to provide their addresses for the last three years, which will be used to carry out credit checks.

• Ideally, the credit check results will confirm if the applicant has been located at the supplied addresses using electoral roll data and information from credit accounts (including credit cards, mortgages, and mobile phone contracts).
• If the applicant is not confirmed at the addresses searched, they may need to provide suitable proof of residency to satisfy the referencing company that the correct addresses have been searched (such as utility bills).

Previous landlord reference

Referencing providers will always seek a reference from the current landlord or letting agent when a tenant is living in rented accommodation.

If a negative reference is received then they will make a recommendation based on the content of the reference. For example, if the referee states that there were financial problems with the tenancy, it is likely that they will recommend that you proceed with a suitable guarantor.

Why would a tenant fail referencing?

The most common reasons for a tenant not to pass referencing checks include:

• The applicant has insufficient income
• The applicant has credit history problems, CCJs, or has been insolvent
• The applicant is unemployed or there are concerns about the status of their employment
• The applicant is self-employed and unable to provide acceptable proof of income
• The current landlord provides a negative reference
• The applicant is a student, unemployed, or on Housing Benefit
• The applicant’s history of residence or identity cannot be verified
• The application is considered generally weak for any other reason (though this is rare)

Even if a tenant doesn’t pass a reference or credit check, it doesn’t automatically make them unsuitable. Find out more about renting to tenants who failed referencing here.

What if a guarantor is needed?

Guarantors must reside in the UK and must be able to verify their residency at their current address by credit history and/or electoral roll data.

• A suitable guarantor must have a clear credit history with no CCJs or insolvencies
• The guarantor’s income must be verified, and be sufficient to cover the tenant’s rent
• Affordability calculations for guarantors generally start at 30-35% of their gross monthly income
• Whilst not a necessity, home ownership is a plus and will be considered alongside the guarantor’s income.
• Self-employed guarantors must have been trading for at least one year and provide a reference in an acceptable format, much like self-employed tenants

How can a guarantor fail referencing?

A guarantor goes through similar referencing checks to those done on a tenant. A rental guarantor can fail referencing for a number of reasons:

• They have a negative credit history
• Their income is insufficient
• They are employed on a temporary or casual contract
• They are self-employed and have no acceptable proof of income
• Their residency at their address cannot be verified
• They have provided fraudulent information to the referencing provider

For landlords, interpreting a tenant referencing report may seem like a daunting task at first.

Dive into our simple guide on tenant reference reports and master the art of deciphering them in minutes.

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