Why do landlords and letting agents do a credit check?

A crucial part of the rental process is a credit check that’s carried out by either the landlord or a letting agent acting on their behalf. This can be a daunting prospect for some people, but there should be nothing to worry about if you’ve got your finances in order. If you’re unsure about it all, here’s a basic guide to help you understand a little more clearly.

What is a credit check?

A credit reference check is when a company or landlord looks at your credit report to get a sense of your financial and borrowing history. It’s an important stage of the housing process that both renters and buyers go through, just for different reasons.

During the check, factors such as your credit history, outstanding debt and any County Court Judgements will be taken into consideration. All this information is legally collected and stored by the three credit reference agencies in the UK: Equifax, Experian and TransUnion. These organisations provide the information to the landlord or letting agent which they will then review.

Why do landlords and letting agents do credit checks?

Just like banks and lenders want to know they’re going to get their money back from a loan agreement, landlords want the confidence that they’ll receive rent payments in full and on time from tenants.

Landlords will likely have their own mortgage bills to pay on the property you’re renting from them, so being reliable with money is a big factor when they’re choosing new tenants. Letting agents work on behalf of landlords and are responsible for ensuring tenants pay full rent when required. That’s why agents can be a little more cold in their dealings because they’re aiming to satisfy their clients.

A credit check essentially gives the letting agent or landlord the information they need to decide whether or not you can be trusted financially as a tenant. If your credit report looks good, there shouldn’t be any issues with you continuing the paperwork.

How can I improve my credit score?

The information that’s given to landlords and agents in a credit reference check is essentially what determines your credit score. So, if you want a better chance of being approved for a tenancy agreement, you’ll need to know how to build a healthy credit score. There are a few ways to do this.

The fundamentals include registering to vote at your current address and making sure all your accounts have the correct details so credit agencies can track your finances reliably.

Then, you can look to start accumulating a positive credit history, which includes paying bills on time, maintaining manageable or low debt levels and proving your ability to borrow and repay money reliably.

Mass applications for loans, credit cards or new bank accounts can be a red flag to lenders and credit reference agencies, so avoid these if you can.

With time, patience and consistency, your credit history should start to shape up and your report will likely be a lot more attractive to landlords, letting agents and lenders.