If you want to rent your home, or have a property to rent out, then you need to understand tenant referencing. Whether you’re a tenant or a landlord, effective referencing is a crucial part of the process. Gain clear, simple answers to all the most commonly asked questions on the subject. We provide all the information you need to successfully navigate tenant referencing.
What is tenant referencing?
Tenant referencing is the process undertaken by landlords – or an estate agent acting on their behalf – to find out relevant information about prospective tenants for their property. It gives the landlord a way of checking the character of someone who may rent their property, to make sure tenants with a good history are chosen.
Why reference tenants for rental agreements?
Landlords use referencing because they want to know that they are renting their property to a reliable tenant. Just like banks carrying out credit score checks before agreeing to a loan, tenant referencing lets landlords make informed decisions.
Landlords want to know if the tenant has a good or bad history of renting previous properties. Things they look for in a good prospective tenant include paying rent on time, keeping the property tidy and respecting the neighbours.
What does tenant referencing involve?
Different estate agencies may vary slightly in their tenant referencing approach, but broadly they carry out the following checks:
1: Credit Score Check
Your credit score is a three-number indicator of how reliable you are when it comes to borrowing and repaying money. The higher the number, the better your credit. This check will also flag any bad credit issues, such as defaulting on a loan or filing for bankruptcy.
2: Tenant Affordability
This is literally designed to check if the applying tenant can reasonably be expected to afford the agreed monthly rent. This is done by confirming their income level and employer, who may provide a reference.
3: Previous landlord referencing
The landlord or estate agent may call up the applying tenant’s previous landlord to discuss their rental history. Much like a job reference, the previous landlord’s opinion of the tenant will carry a lot of weight. For this reason, it always pays to maintain good relations with them!
4: Right to rent
All landlords in England must check if their intended lodger has the legal right to rent property. If you’re a landlord renting out your property without using an estate agency, this guide from gov.uk will show you how to check.
Do tenants pay for referencing?
In 2019, the Tenant Fees Act came into law in England. This stated that tenants cannot legally be charged for referencing checks. This act was designed to help root out bad practices among estate agencies using hidden fees to unfairly boost profits. Today, the cost of all tenant referencing must be paid by either the landlord or the estate agency handling the letting process.
How long does tenant referencing take?
Generally, tenant referencing should take no longer than 48 hours. Again, this depends on exactly how many checks the landlord/estate agency is doing. However, the property rental market in the UK is notoriously fast-paced, so a fast turnaround time is the usual outcome.
Can I get my holding deposit back if I fail referencing?
If you fail your tenant referencing check, you should get your holding deposit back from the landlord or letting agent. However, you must give accurate, correct information and you can’t voluntarily pull out of the process. This will forfeit your right to a deposit.
If you follow these rules, and the tenancy does not go ahead, you must have your deposit refunded in full. The landlord or agency cannot charge any fees or deductions. Again, this provision is part of the Tenant Fees Act.
How long can landlords keep holding deposits?
Landlords can only legally keep the holding deposit for a period of 15 days. The only exception is if both the landlord and prospective tenant agree to a longer deadline. This might be done if further checks are needed but, ultimately, both sides are happy to start the arrangement.
If both sides agree to this, they need to state the agreement in writing.
When can a landlord fully retain a holding deposit?
Under the Tenant Fees Act, there are only three scenarios where a landlord can retain a holding deposit. They are:
- The tenant provides false or misleading information;
- If the tenant pulls out of the application process before the Deadline for Agreement (the Deadline for Agreement is 15 calendar days from the time the holding deposit was taken to when the contract is signed and dated by both parties);
- The tenant fails to take all reasonable steps to enter into the tenancy agreement.
If I am renting out my property, do I have to reference check my tenants?
No – other than the ‘right to rent’ check, you don’t have to carry out any forms of tenant referencing. However, it’s highly advisable that you do so. It gives you a measure of reassurance that your tenant will take care of your property and pay rent correctly.
Do I have to accept tenants if they fail any of their referencing checks?
No – if a prospective tenant fails any of their referencing checks, you are not obliged to rent to them. Ultimately, the decision is yours as the landlord as to whether you accept any tenant or not. The only instance where it is illegal to refuse a tenancy is if that decision is based on unlawful discrimination. Examples of this include refusing to rent based on the applicant’s age, race, gender, religion or marital status.
How do I pass a tenant reference check?
You can improve your chances of passing a tenant reference check by:
- Boosting your credit score. There are a bunch of simple things you can do right now to make a positive difference.
- Getting a reference from your employer stating that you are generally reliable in nature.
- Maintaining good relations with any previous landlords.
- Ensuring that you do qualify for ‘right to rent’. This right automatically applies to all UK citizens and foreign nationals holding valid visas.
Why would I fail tenant referencing?
If you have failed a tenant referencing check, it’s probably due to one of the following factors:
Your credit score is too low. While there is no ‘exact’ score needed to pass a tenant referencing check, it’s better if you have a “good” or “excellent” rating. Score bands vary between agencies, but around 660-800 is good, and higher than that is excellent.
Your income level is too low or too uncertain. Landlords want tenants who can reliably pay the rent on time, every month, without difficulty. Accordingly, they want tenants with stable income – a steady job that pays enough, or other sources of routine income like a reliable guarantor. If you don’t have these things, the estate agent or landlord will (reasonably) question your ability to pay the rent.
You have a history of being a bad tenant. If you left on poor terms with your previous landlord, this can definitely hurt your chances of passing a tenant referencing check. Even if the issue was not your fault, having a poor referral from a previous landlord will set alarm bells ringing.
You don’t have the right to rent in the UK. This will only apply if you are not a UK citizen and you don’t hold a valid visa.
What can I do if I fail my tenant referencing checks?
If you fail your tenant referencing check, you can still try to persuade the landlord to accept your tenancy. Landlords can decide to take on tenants who fail credit checks or other referencing checks, and they frequently do. It’s all a negotiation process, so try the following:
1: Ask for a letter of reference from your employer
This can prove that you are a better credit risk than your score might suggest.
2: Ask which referencing elements you failed
Often there are issues that have a simple explanation. For example, your credit score might be low because you’ve moved bank accounts too frequently, or you might not have taken out any form of loan in a long time. If you can explain your side of the story, the landlord, may be more willing to take you on.
3: Offer to arrange for a guarantor to secure your tenancy
For tenants with poor credit, this is often the best way to reassure landlords that rent will be paid regularly.
What is a guarantor?
A guarantor is someone who agrees to pay your rent if for whatever reason you can’t pay it yourself. Typically, this will be a parent or close relative. It just needs to be somebody with a reliable income or enough assets to cover you. If everyone involved is happy with this arrangement, it needs to be in writing to be legally binding.
What happens after you pass tenant referencing?
After you pass tenant referencing, the agency that carried out the check will inform your prospective landlord. This will involve simply calling or emailing them to say that you have passed the referencing, and that there’s no reason to refuse you a tenancy.
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