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Keeping accounts

Credit References from Let Alliance via ELA

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Prospective tenants must complete the Let Alliance Comprehensive or Instant Application Form. All sections must be completed as fully as possible. They will also need to date and sign the Consent Form. Forms are available from the ELA Office.

 

The applicant’s email address and contact number must be included and email addresses and contact numbers for the landlord and employer. All applicable sections of the form must be completed.
 

For a comprehensive check tenants will need to provide:

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  • 3 months’ bank statements & 3 months’ payslips. Or, if they have recently commenced a new job, a copy of the employment contract which must include the salary

  • if currently renting elsewhere, a copy of the tenancy agreement

  • if self-employed, their accountant’s details, (company name, name, contact number and email address) or their latest HMRC SA100 or SA302 return

  • if retired, proof of pension(s)

 

The Instant checks are literally that, as soon as the online form is completed the report is generated.


The Comprehensive reports can be quick but usually take 5-7 working days.  The longest delay tends to be obtaining the employer or landlord reference. If a landlord has used a Letting Agent, this rule of thumb is a good guide as to whether the agent has completed a comprehensive check and what the landlord has been charged for them doing so.

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For reference forms contact: info@easternlandlords.org.uk

Payment can be made by card, by calling the office on 01603767101 or we can issue an invoice via your ELA account. Prices are per reference, which is currently £30 Comprehensive, £20 Express.
 

Principles of Credit Referencing

 

Credit checks for landlords are extremely important and are always recommended as a standard procedure. Our checks are carried out by Let Alliance.

 

What is a credit reference check?

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Every landlord is a data controller in their own right and they must handle tenants', including prospective tenants, personal data appropriately.

 

A credit check report for landlords checks an individual’s credit history and will give an indication of whether they can afford to take on a new debt. As a landlord you should carry out tenant credit checks before granting a tenancy.

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There are three credit reference agencies in the UK – Equifax, Experian and TransUnion. These agencies all collect financial data on individuals, which is then used to compile credit reports. Depending on the type of check made, these reports can detail how much credit someone has used previously and how much they may be able to afford.

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How to carry out a credit reference check on tenants

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In order to carry out a credit reference check, you will need to use a third party. Financial data is sensitive and therefore only particular companies can access it.

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As a member of Eastern Landlords Association, you will have access to credit checks and tenant referencing. Every application should be collated by the landlord, as this gives an immediate indication as to whether the prospective tenant can realistically afford to rent a given property. This can avoid the landlord paying for referencing which will not produce and 'Acceptable' report. in cases where the tenant is likely to produce a 'Not Acceptable' report, the landlord has the option of requesting a Guarantor. The process for referencing a Guarantor is the same.

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What does a credit reference report show?

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The two types of credit check that we provide our members are:

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Express – This determines whether the tenant has been located on an electoral roll and whether they have any CCJs.

 

Comprehensive – This includes the credit check alongside references from any current landlord and employer.

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Why should landlords carry out credit checks?

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Landlords should carry out credit checks on any prospective tenant. The credit check will show if the tenant pays their bills on time, and if there have been any late or missed payments in recent years. The report will also detail any credit agreement and current debt the tenant may have, in addition to any fraud convictions and CCJs (County Court Judgements). A credit reference report also confirms previous addresses.

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All of this information is very useful to a landlord; if a tenant has a history of paying late or not at all, it may mean that you do not wish to offer them tenancy.

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Will a tenant know if you’ve carried out a credit reference check?

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Before you carry out a credit check, you should gain permission from the tenant. If you carry out a credit check without a tenant’s authorisation, they may know that you have done this and could potentially take legal action against you.

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Anyone that has an account with one of the credit reference agencies will be able to tell when a credit reference check has been carried out and are able to track their credit score.

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What happens if a tenant fails a credit score?

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Many tenants worry about credit checks, even if they have been honest about previous credit issues. There are several reasons why a tenant might fail a credit check, the main one being that the referencing agency has been unable to verify their current address. This is not necessarily a cause for concern, due to a number of factors:

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  • The tenant is not responsible for paying bills at their current address.

  • The tenant has not lived at the current address long enough to get onto the electoral roll.

  • They are not named on the tenancy agreement at their current address.

 

If this happens, you can ask the tenant to either provide a letter from their current landlord, confirming that they are living at the address provided, or ask the tenant to show a letter from their bank confirming this information.

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Furthermore, tenants often fail credit checks because their salary is deemed too low to afford the rent. Credit agencies usually expect gross pay to be at least twice the rent (sometimes three times) and will automatically fail anyone that does not reach this.

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Letting to tenants with a poor credit score

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There are several reasons why a tenant has poor credit. It could be that they had very little credit in the past and therefore have a ‘thin file’, or they may have CCJs which is an indication of having problems making payments in the past.

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In the case of a tenant with a ‘thin file’ it may be that they are very good at managing finances and never needed to take on any debt. We would recommend considering each case individually because bad credit is not necessarily a deal breaker. If you are concerned about a tenant’s ability to afford rent, you can ask to see bank statements to understand the money that is coming in and how it is managed, or you could ask for a guarantor. This is common practice for someone who does not have credit information. The guarantor will be expected to pay the rent on behalf of the tenant if they default.

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Should you credit check a guarantor?

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Quite simply, yes. A guarantor will be responsible for making rental payments if the tenant doesn’t, so you need to carry out the same credit checks for a guarantor as you would a tenant. If the guarantor’s credit check flags up issues such as struggling to make payments, or being overly in debt, you may wish to request that the tenant uses a different guarantor.

 

If you require any advice regarding credit checks for landlords, our experienced staff can be contacted for advice Monday – Friday 9am to 5pm via phone or email.

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We are a member of the Property Redress Scheme. We are not a member of a client money protection scheme - we do not charge fees, or take monies (rent, deposit etc), from tenants.

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