A tenant’s guide to referencing
Let’s assume you’ve found a property you’d like to rent and that you’re confident you can easily cover the bills and the monthly rent. You’re just itching to get the keys and move in, but first, you’ve got to pass a tenant referencing check.
It’s worth understanding a bit more about tenant referencing because that will help things move more quickly. Landlords aren’t being awkward when they want you to pass a test. They’re simply protecting their income and their assets. However, it can feel a little intrusive to have to provide evidence of your earnings, savings, addresses and your previous landlord. Our advice is just to get on with it, make sure you provide the details requested and answer any questions as quickly as possible. It’s your starting point for a good relationship with your new landlord.
The information you’ll need to provide will differ depending upon your circumstances, with students, the self-employed, benefit claimants and retired applicants being assessed differently to those in employment. Again, this isn’t about favouring one group of applicants over another. It’s about the evidence that different types of tenants can offer.
Proving your income
If you’re in employment, you will be asked for your employer’s details, and the referencing provider will contact your employer to request written confirmation of your contract, salary, position and length of employment. If your salary is not deemed enough to cover the rent and other living expenses, you may be requested to find a guarantor.
As a self-employed individual, you don’t have the convenience of the monthly or weekly wage slip to prove your income. Instead, the referencing provider will want to know the name of your accountant if you use one. Alternatively, you might be asked for copies of completed tax returns or bank statements.
Some landlords focus on letting to students who may not have any employment income or savings. It’s likely you’ll be asked to provide a guarantor – perhaps a parent or guardian – who will also then be subject to a referencing check.
Retired applicants will be expected to produce pension statements and a reference from the pension provider in addition to a few months of bank statements.
Different referencing providers require different evidence from benefit claimants, but often require details of a guarantor.
In addition to looking at your income, the reference will look at your outgoings. They’ll ask for up to three years’ addresses and may request utility bills to prove your current residence. Using this information, they’ll conduct credit checks. Most referencing providers use the big credit checking agencies to look at any credit cards, store cards, ongoing contracts, mortgage or loan repayments you may have.
If you’re a tenant now, you should also expect to provide details of your current landlord or letting agent. They’ll be asked whether they would recommend you as a tenant.
Open Banking – making life easier for everyone
More recently, Open Banking has been implemented into the tenant referencing process. This offers a more thorough picture of you as a prospective tenant. At LegalforLandlords, we’re one of the latest businesses to embrace the technology. The principle has been around for a couple of years, but it’s taken a while for the general public to see the advantages. What does it mean for you as a prospective tenant? Well, it makes the checking process a whole lot quicker. The quicker your background is checked, the quicker you can move into your new property. Simple. The method is beneficial for everyone involved.
You will need to give consent to be involved in the process, as it gives the referencing provider access to your 12-month income history – which might sound alarming in black and white – but rest assured, it’s safe and secure. And these checks are necessary. After all, your landlord needs to be reassured that you can pay the bills, and on time. This insight into your banking history also means less effort on your part, as you won’t be required to provide bank statements and payslips. If you opt in, expect a quicker and smoother process all-round.
What’s the verdict?
There are normally three outcomes for a reference: a pass, a fail or acceptance with a suitable guarantor. If the rent is within your means and you can provide the evidence to prove it, if you have a good credit history and a good track record with your previous landlord, a reference is nothing to worry about. In fact, a fail can be good news – it can protect you from overstretching yourself and ending up struggling to pay the bills.
Get the details requested together and let the experts get on with it, and you’ll soon have the keys to your new home.