Do you bother credit checking prospective tenants? Surprisingly, many self-managing landlords don’t, and that’s often why they end up with bad tenants that end up in rent arrears.
Granted, credit checks aren’t bulletproof, they won’t guarantee “perfect tenants”, but they can help avoid bad tenants, and that’s precisely why they’re so important!
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.
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.
Here are a couple of recommended Tenant Credit Check services…
Notes / Includes|
Fast Credit Check
A fast credit check that will provide essential information about your tenants:
*subject to tenants response times
Normal price: £9.99
50% Discount Code: PIPBASICTR18
Notes / Includes|
Full Tenant Referencing
A comprehensive check giving you a detailed picture of your tenants’ suitability:
Normal price: £24.99
50% Discount Code: PIPFULLTR18
Notes / Includes|
Notes / Includes|
Please note, I try my best to keep the information of each service up-to-date, but you should read the T&C’s from their website for the most up-to-date information.
Landlords in England: You CANNOT pass on the costs of credit checks to tenants
Just a quick word of warning for my fellow landlords in England!
On 1st June 2019 the “Tenant Fees Act 2019” came into force, which is a legislation that focuses on banning and restricting letting agents and private landlords (in England only) from charging tenants with certain fees, which includes referencing fees and credit check fees.
So if you’re a landlord in England, from the 1st of June 2019 you will not be able to charge your tenants for any form of referencing. If you do, the charge will be deemed unlawful, and you could face a hefty financial penalty.
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?
Disclaimer: I'm just a simple landlord blogger; I'm not qualified to give legal or financial advice. Any information I share is my opinion based on my personal experiences as an active landlord, and should never be contrued as legal or professional advice. For more information, please read my full disclaimer.