New research has revealed that nearly half of UK landlords in the UK (46%) would decline a tenant’s letting application if they have a poor credit history.
Credit histories are not always part of regular checks for new tenants, despite them giving a better picture of how an applicant has dealt with making payments in the past.
Usually, letting agencies rely heavily on publicly available information like county court judgements or declarations of bankruptcy, which can give some insight into a person’s previous financial footprint, but not the full picture of their current situation.
The fact that landlords would put so much weight behind a credit score suggests the market needs to make this comprehensive check a normal part of the application process.
According to the industry report, commissioned by tenant referencing and insurance agency Landlord Secure, 48% of landlords would refuse to sign a lease agreement with a tenant who had been subject to a county court judgement in the past, while 42% would reject an application from a tenant with past insolvency issue.
Applicants with existing debts like credit cards or loans would raise red flags for 30% of landlords, while those in receipt of housing benefits would struggle to be accepted by 19% of UK landlords and those on universal credit would fail against 16% of landlords.
Although rent payment history does not form part of credit checks, there are increasing calls within the sector for this to become the norm, so those in rental properties can build a credit score based on regular and timely payments and have access to the same advantages as those with a mortgage.
Steve Burrows, managing director at Landlord Secure and LateRent, said:
“Those in rental properties are at a serious disadvantage when it comes to building a credit rating because paying rent on time doesn’t count towards this score.
“Given that landlords would put more weight behind a tenant’s credit score, those in rental properties should be given the chance to build a better credit score based on their history of paying rent on time.”
Landlord Secure has recently launched LateRent that allows landlords to report payment history to credit reference agencies, enabling them to carry out robust affordability assessments on potential tenants. It also allows tenants who pay on time to build up a good credit history.