Tenant referencing checks may seem like a long and invasive process, but there is nothing for tenants to worry about. The checks are standard practice in the UK.
Tenant referencing helps the landlord learn more about your financial situation and employment status so that they can determine if you’ll be able to pay the rent in full and on time. Being referenced shows that the landlord is professional and takes their responsibilities seriously.
How Does Referencing Work?
Referencing is made up of a number of different checks. They provide your landlord with an insight into your background such as a written verification of employment and income. The other checks may include a reference from your previous landlord, residency confirmation, affordability calculation and a full credit history check, including any outstanding County Court Judgements (CCJs).
Remember that the checks are likely to show how honest you’ve been when providing information, and if a landlord feels you are untrustworthy, they’re less likely to ignore other small issues that the reference might reveal. Trust between a landlord and tenant is important for the tenancy to be successful and should be established from the start.
The referencing process may be initiated by your landlord or the letting agent. Your permission is required to carry out the relevant checks, so nothing will proceed without your consent.
How Can You Make Tenant Referencing Checks Quicker and Easier?
When you’ve found a new home you love, you just want to be able to sign the contract as soon as possible. Completing referencing is the most important step on the way to signing the contract, so helping the process run smoothly is best for everyone.
Being prepared is one of the best ways to make the referencing process quicker. To begin with, you will most likely be sent an online form to complete. Do this as quickly as possible to show that you are prompt and keen to move into the property.
Also, try to gather your documents in advance where possible. Documents include things like bank letters confirming your account number and sort code. A landlord may have a number of tenants vying for his or her property, and may be swayed by a complete set of documents rather than delay the transaction.
It’s a good idea to give your previous landlord and current employer a heads up that they may be contacted. Many companies are likely to carry out one or two telephone and email chases per day, but your previous landlord and employer may not understand how urgently a response is needed.
You can politely remind them about the references after a few days to ensure they have seen the forms and are in the process of completing them. The referencing process can slow down significantly if any of these parties fail to respond to the request for a reference and, unfortunately, it could even lead to you failing.
What Happens if You Fail Referencing
It’s not the end of the road! There are a number of reasons for why you may not pass your reference and while some are more serious than others, it is ultimately up to the landlord to determine whether they will take you on as a tenant or not. Speak to your potential landlord and see if this is something that you both can work out.
Let’s look at some reasons why you can fail referencing, and why the landlord should still consider letting to you anyway.
Failing the Affordability Calculation
You may have failed the affordability calculation if your gross income is less than 35% the rental amount. If you have significant savings that you intend to use to make monthly payments, then the landlord should take this into consideration, but savings won’t contribute to the affordability calculation.
Similarly, you may be a student who is supported financially by parents or student loans. This is very common and can be easily explained to the landlord – preferably even before referencing begins. It’s always good to back this up with evidence, such as bank statements, where possible.
Low Credit Score
A low credit score is another common way to fail referencing. This can also be explained to the landlord if it is due to the fact that you have never borrowed money or used a credit card. Ensure that you communicate this clearly, as putting the score in context can help the landlord make a decision that will benefit both parties.
Moving Address Often
Another reason for why you may fail a reference could be because you are a student. Students do not fit the mould of tenant referencing because they move address often and most usually have no credit history.
This does not mean that students make bad tenants, of course, and landlords will appreciate this. Remember that even if you fail referencing, you still have the option to submit a guarantor to enable you to continue with your application.
What Is a Guarantor?
A guarantor takes responsibility for paying the rent if you are unable to: protecting the landlord from loss without adding to your move-in costs.
The guarantor needs to be prepared to sign a Guarantor Agreement as well as the tenancy agreement. Make sure you explain this to them properly as signing these documents means they will be legally and financially liable to keep your contract with the landlord if you are unable to.
A suitable guarantor must be based in the UK, have a good credit history and should have sufficient income to cover their own living costs as well as your rent. Remember that if you have failed your reference due to a credit check, you may still be able to rent a property, however it is necessary for your guarantor to pass their credit check.
Priya Gill is a referencing expert at UK property insurers, Rentguard. OpenRent partner with Rentguard to provide an unbeatable referencing service and Rent Guarantee Insurance offer to landlords across the UK!