Reference and Credit Checks on TenantsWritten By PropertyLoop February 16, 2021
Wondering what exactly a reference and credit check is ie exactly what do they check and over what time periods? It’s good to know if you intend to rent a flat because if you fail those checks you may not be able to.
So, to get the lowdown on tenancy referencing and checking, read on… we have the answers right here:
What Is a Reference Check for Tenants?
Depending on the type of tenant you are, reference companies will come up with various types of checks. It depends, for instance, on whether or not you are employed, self-employed, a student, retired or claiming benefits. If you are acting as guarantor for a son or daughter then your checks will also differ.
Checks for Employed Tenants
Written verification from an employer will always be sought, along with info on whether the work is contract, short term etc. If the latter then the landlord will obviously want to know when it ends and at which point, can the tenant, sign up a guarantor?
Is the rent more than one third of the tenant’s salary? If so that tenant may be deemed unsuitable.
Checks for the Self-Employed
Self-employed individuals must have at least one year’s worth of accounts to prove their monthly income. In the absence of this, a guarantor will be necessary.
These accounts can only be verified by an accountant and, if there is none, then the last tax return filed. Bank statements may also need to be produced. References should be from a business email address or on headed paper.
The rent must be around 35% of their gross monthly income – so, a little higher than a PAYE employee.
Student Tenant Referencing
Students usually always require a guarantor, especially when they don’t have a job. The guarantor must prove that they can afford their own mortgage in addition to the student rent at the same time.
Checks for Retired Individuals
The check for retired tenants includes looking at an annual pension statement and bank statements for the previous three months. A copy of their P60 will also be necessary. And, just like the self-employed individual, the tenant’s rent must not be more than 35 per cent of their gross monthly income.
Those who are paying by independent means need to show bank statements which can prove they have savings which total at least six time the rent for as long as the tenancy lasts.
Reference Checks for Benefit Claimants
Child Tax Credit, along with Working Family Tax Credit are often included in the affordability calculation. So too is Long term Disability Living Allowance (with written proof).
Benefits which don’t count include Child Benefit and Carer’s Allowance.
What Other Checks Are Done for Renting a Property?
Another criteria looked at during referencing is proof of address (residency). A tenant should be able to provide this for the past three years in order to carry out credit checks. This can be done via checking the electoral roll or providing utility bills with the address.
If they have rented before a tenant will also be expected to provide a reference from a previous landlord or letting agent (preferably in writing).
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