Credit Score Basics > How do credit checks for renting work?

How do credit checks for renting work?

A credit check shows your credit history and gives lenders an idea of how reliable you are when paying back your debts.

Just as banks look at your credit report to decide if they will lend you money, so do landlords look at your credit report to decide if they will let you rent their property.

Do I need to pass a credit check to rent?

In many cases, yes. If you apply to rent a property through a letting agent, they'll usually perform a credit check. Private landlords don't really do this – it makes the whole process a bit longer and more expensive for them.

Also, bear in mind that there's no specific credit score that counts as a "pass". Landlords mostly look out for serious things in your credit report, like County Court Judgments (CCJs) or insolvencies.

Finally, you're not legally required to agree to a credit check. Of course, if you don't, a landlord will probably not feel comfortable renting out to you.

Why does a landlord need to check my credit history?

Landlords want to ensure tenants can pay the rent in full and on time. A credit check gives them some information about your history of paying back debts.

This is important because once you start renting, it can take time to get you out if you stop paying rent. They'll need to give you a written notice of eviction and then maybe get a court order called a "possession order".

This all takes time and money, so landlords want to be as sure as possible that you're a responsible person and that they won't need to evict you.

How do credit checks for renting work?

First of all, there are a few essential things you need to keep in mind:

• The landlord or letting agency needs your permission to run a credit check.
• If you have a bad credit history, let the letting agent know before you give them any money. You might not get your deposit or rent back if you fail a credit check.
• Your landlord or letting agent is not allowed to ask you to pay a fee for a credit check. Otherwise, you can report them to Trading Standards.

Second, landlords rarely check your credit – it's usually letting agencies. Even then, they will use a third-party tenant referencing service for this part of the process.

Finally, the landlord or the agency will only perform a soft check on your file. This means they'll only check the public information, and this check won't be visible afterwards. This soft check won't affect your credit score and should take less than 48 hours.

What they'll see won't be as thorough as what lenders and banks see. It will only include information from public registers: the electoral roll, the Individual Insolvency Register, and The Register of Judgments, Orders and Fines.

As a result, landlords and letting agencies will only be able to see:

• County Court Judgments (CCJs) or insolvencies caused by missed payments in the past.
• Your electoral roll status, which proves that the address you gave them is the one you're actually living at.
• And if there are any credit accounts linked to the name and address on the credit report.

In other words, they'll only be able to confirm your name, address, and any history of insolvency. They can't access information on actual credit agreements or loans.

What other information might a landlord ask for?

Besides a credit check, a landlord might also ask you for:

• References from previous landlords.
• References from employers, especially for verifying your salary. It would help if you also showed payslips or a P60.
• References from your accountant if you're self-employed. In this case, you should also show a copy of your latest self-assessment tax return.
• Proof of your right to rent in the UK. If you're a British national, it's easy. But if you're not a UK citizen, you'll need to go to the UK Government website and apply online for a share code, which you will then give to your landlord. If you cannot get a share code, you can also use your immigration documents.

In some cases, you might also be asked to use a guarantor. The guarantor will have to agree to pay the rent if you somehow don't. You can ask a close friend or relative with a better credit history and steady income.

What if I fail my tenant reference credit check?

If you failed your tenant reference credit check, you should try to find out exactly why. Talk to your landlord or letting agency. Ultimately, it's their decision.

If you know that you have a poor credit history, it's a good idea to be honest upfront. Landlords only check your credit history to see if you've had any major problems or unpaid debts in the past. They don't care about your actual credit score.

And if you feel confident you can pay the rent, try negotiating. Your landlord or letting agent might still be open to renting to you if you pay more rent in advance, put down a larger deposit, or get a guarantor.

How do I pass a credit check for rent?

While you can't go back in time and change your credit history, you can do a few things now to improve your chances of passing a rental credit check.

First, go to Equifax, Experian, or TransUnion and check your credit report yourself.

Then, if you notice any errors, contact these credit reference agencies and let them know about it. Here are some common examples:

• A CCJ that has been settled but is still showing.
• Credit card fraud.
• Missing credit history.
• Or being associated with people you no longer live with.

You should also ensure that you're on the electoral roll. This is one of the most essential items on your 'soft' public credit history. Your name and address from the electoral roll are recorded on your credit file, and it helps agents confirm your identity. Plus, it's a legal requirement.

Also, if you have any other proof of credit history, you should prepare it.

This can be anything from bank statements showing bills being paid on time or even statements from utility companies showing that you're up to date with your bills.

Finally, speak to a potential guarantor. Don't wait until you're asked for one. They must go through the same credit checks as you and sign an agreement confirming their obligations.

Does renting build credit in the UK?

One thing you should be aware of: while you first need to pass a credit check to rent, renting itself can actually improve your credit history.

Recently, several services have launched that help UK residents report their rent payments to the credit reference agencies.

One such service is Wollit. We report your regular rent payments to Experian – showing that you’re financially responsible, and making it easier for you to apply for a mortgage in the future.

That's one way to never deal with rental credit checks again.

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