46% of landlords would reject tenants over their credit score

The key to stress-free letting, and arguably an agent’s main goal, is to pair the right tenants with the right properties. Doing this will almost always require carrying out background checks on potential tenants, garnering information on everything from their previous employment and tenancies, as well as their right to rent.

As all experienced letting agents will agree, the more thorough the vetting, the more likely that a quality tenant will be sourced for properties. And thus, the less likely it will be that the landlord encounters issues during the tenancy.

Credit scores a top consideration

A recent study discussed in a Landlord News article hones-in on credit scores in particular, finding that nearly half (46%) of landlords would refuse an application from a potential tenant if they had a poor rating.

Currently, in-depth credit checks do not form a part of the standard application process. If they were, 48% of landlords would reject a potential tenant if they were previously subject to a county court judgement, while 42% would refuse an application from a tenant who had experienced insolvency issues in the past.

Tenants with lingering debts, such as loans and credit cards, would put 30% of landlords off accepting their application. Meanwhile, 19% of landlords would refuse someone in receipt of housing benefit and 16% would decline an applicant on Universal Credit.

Rent payment history should become the norm

This study comes at a time of increasing calls in the sector for credit rating agencies to include rent payments when calculating people’s scores. As Just Landlord reports, a poll from the Residential Landlords Association (RLA) found that 61% of investors would support such a move.

Presently, a tenant may find it difficult to obtain a mortgage with a low credit score, even if they have a great track record of paying their rent on time and in full. This would inevitably change if payment history was taken into account when calculating scores.

If tenants were rewarded with a higher score for paying their rent on time, it would also help to make them more appealing to both letting agents and landlords for rental properties.

The move would benefit landlords, too, offering them a more comprehensive and accurate assessment of a potential tenant’s credit and rent payment history. The RLA has put forward proposals to the government, asking that it works alongside the industry to update the process currently in place.

RLA chairman, Alan Ward, commented: “With many tenants wanting to buy a house of their own, it is absurd rent payment is not routinely included when undertaking credit checks for mortgage applications.

“Moving to such a scheme would help not just tenants, but also landlords, by giving them a clearer sense of whether a prospective tenant has historically paid their rent in full and on time.”

Partner with Stride Let Protect

Stride Let Protect can assist in the sourcing of quality tenants for your properties. We provide a comprehensive, tenant referencing service, which features extensive checks on potential tenants’ backgrounds to bring you, and the landlords you work with, greater peace of mind. Our process includes everything from alias name and financial sanctions checks, to a full credit history search spanning the past three years.

If some issues do arise during the tenancy, it’s best for landlords to have protection in the form of rent guarantee insurance. This is something you can offer landlords through Stride Let Protect, tailoring the cover to suit the needs of you and your clients. To find out more, give one of our experts a call today.

Sources:

https://landlordnews.co.uk/landlords-refuse-poor-credit-score/

https://www.justlandlords.co.uk/news/credit-scores-include-rent-payments/

Published: 18th December 2017
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