Do you bother credit checking prospective tenants? I never used to because I could never be bothered, but as I gained more experience, I realised there are a lot of undercover shitheads out there that are itching to make a sucker out of everyone. Granted, credit checks aren’t bulletproof, they won’t guarantee “perfect tenants”, but they will reduce a potentially large risk.
Credit checks are relatively cheap, and worth the investment. Most reputable letting agents will use third party companies to perform comprehensive tenant credit checks on behalf of the landlord. The less respectful agents will cut corners and get intermediate checks. The real snake oil agents will avoid credit checks all together (but say they do it on the tin). So if you’re using an agent, make sure you enquiry about what level of credit checks they actually do, and ask to see the report/results!
If you’re not using an agent (or even if you are), the good thing is, you can contact a credit check service directly and do the checks yourself.
Why Credit Checks are so important
Notoriously, tenants with poor credit ratings will avoid going through letting agents, because they’re know most agents perform thorough credit checks. So to try and bypass that obstacle, the tenants will try to target landlords that are managing their own properties, because many of them don’t bother with credit checks. That allow will their poor credit rating to go undetected!
So if you’re going it alone, without a letting agent, it’s especially important to get all your prospective tenants credit checked before striking up a deal, because you’re usually the prime target! That said, it’s still incredibly important to be just as vigilant if you’re using a letting agent, for the reasons already explained.
It’s also crucial to completely ignore what your prospective tenant tells you regarding their own credit rating. Let that noise go through one ear and out the other. It’s essentially garbage, and here’s why:
Here’s what happened to a landlord recently, which they shared on the landlord forum:
Last Thursday evening I conduct 3 viewings, one after the other, on a modest property.
Everyone seems very interested. One person makes an offer on the night, I tell them not to worry, I won’t make the decision there and then. On the Friday morning I get contacted by the other two viewers – they all want it. They all offer the asking price. I get to choose.
So I actually choose the first person who offered.
Scientific? No. Gut feel? Yes.
I speak to her on the phone, I ask if she’s OK with the rent, OK with the deposit and whether she has a clean credit history. She says that she had a few problems several years ago, but that’s long-gone history.
Anyway, they pay to apply, they pay for the credit checks… today it comes back with 5 CCJs.
Around £6,000 in unpaid debt. Why did they go through the application process? Yes, you can be unaware of a CCJ… but can you be unaware of 5?
Hopefully that’s enough to scare you shitless into religiously doing credit checks on all prospective tenants :)
In order to perform a credit check, you will need permission from the prospective tenant. The applicant will need to sign a release authorizing the landlord/agent to perform a credit check.
Most credit check companies will provide landlords with a form online which can be downloaded for free, but I use a homemade generic one, which captures only the information I need. You can download the Tenant Reference Form I use.
If you use letting agents to find tenants, it’s probably worth investigating:
- 1) which company they used to do credit checks
- 2) what type of checks they perform. Most credit check services will provide different levels of service, from basic to comprehensive
However, if you’re not using a letting agent, and managing your property yourself, you can easily credit check your tenant directly through a specialised service.
I’ve looked through a few services online, and here are the one’s that look quite alriiight…
Basic check for £15.88 with Tenant Verify reveals an individual’s credit score, outstanding debts, whether there have been any county court judgments filed against them, and their main residence for the last six years. More comprehensive check with Tenant Verify for £30.88 gives you the landlord’s contract of employment, earnings and character references.
They offer 4 different levels of tenant screening, the most basic being £9.95. The full tenant profile express package is a lot more comprehensive, which costs £29.95.
Property Investment Project has been given an exclusive 10% discount code: SCREENING10 (only valid for first tenant screening application)!
Starting from £15 + VAT, quick online tenant referencing, with instant references. Their tenant referencing is powered by Experian.
They offer a bronze, silver, gold and platinum service, ranging from £8.95 – £29.95.
Important: I want to strongly clarify, doing a credit check should be one small part of your referencing protocol, you should be using several other referencing techniques to reduce your risk. For a more complete guide on tenant referencing, I invite you to read the tenant referencing guide for landlords.
Do you bother getting a credit check on your tenants? If so, which service do you use? Does anyone know of any other reliable credit check services?