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Renting and your credit score - a guide for applicants
If you’re applying for a tenancy and your agent uses a reputable supplier such as Rent4sure for their referencing, it’s likely that a credit check will be carried out as part of the process. This is to assess creditworthiness.
Building and maintaining your credit score is an essential part of financial health
Credit reports are used by lenders to help them make a decision on whether or not to offer you credit, along with a number of other factors that can vary from lender to lender. The file shows your financial history - for example, how much debt you have, whether you’ve missed any payments, and if you’ve had any County Court Judgements filed against you.
Reports don’t just impact your ability to rent a property, get a credit card or loan, but can also affect many of the other financial products you rely on - such as monthly insurance, mobile phone contracts, car loans and banking products. The lower your credit rating, the less chance you have to access the financial products you need. You may also find yourself subject to poorer terms than others with a higher credit score.
Ill health, caring responsibilities, a change in work or personal circumstances, can all impact someone’s finances through no fault of their own. This won’t necessarily harm your credit score or reports, but your credit history could be affected if you fall behind on loans or credit card payments.
Can you afford to pay the rent?
With 4.43 million households occupied by private renters in England, renting is on the increase and demand currently outstrips supply. When you apply to rent a property, the landlord will want evidence that you can afford to pay the rent.
The industry standard affordability ratio requires tenants to earn 2.5 x and guarantors 3 x the monthly rent each month. Some landlords will allow leeway on this, and rent share is also taken into account.
A credit check may well be part of the referencing process a prospective landlord carries out, but you can rest assured that being referenced won’t affect your credit score.
Credit checks are one of the measures used by many letting agents and landlords to assess an applicant’s suitability for renting a property, and scores take into account a number of factors including borrowing history and financial associates.
What does a Credit Reference Agency do?
There are three main Credit Reference Agencies in the UK - TransUnion, Equifax and Experian. These independent organisations compile information on how well you manage credit and make your payments. Lenders use this information to make a decision about whether to offer you credit and on what terms.
By law, all CRAs have to provide you with a copy of your credit report for free. As there may be a difference in some of the information each agency holds about you, it’s usually worth getting a copy from all three CRAs in the first instance or if it’s been a long time since you last checked.
It’s important to note that a credit score is different from your credit report. Each credit agency will give you their own ‘score’ broadly based on your application form, your credit report and any information they have about you already. This score isn’t definitive, but it will give you a good idea of what lenders might see. What you need to look more closely at is the information they hold about you in your file.
You can find out more about credit ratings, reports and scores, here: https://www.moneyhelper.org.uk/en/everyday-money/credit-and-purchases.
When you apply for credit the lender tries to predict your future behaviour from your past financial history, so it’s a good idea to find out your rating and - over time - try to improve it if necessary.
The decision to let
Although Rent4sure is responsible for carrying out the referencing checks, it’s your letting agent and/or landlord who will make the decision to let. However, if you have any questions about the referencing process, or just want to talk anything through with us, then please do get in touch. We’ll be happy to help.
How can I help boost my credit score
• Make sure you’re registered to vote
Getting on to the electoral roll is a major factor in boosting a credit score and provides valuable proof of address. Credit agencies see it as a positive sign, because not being registered increases the chances of the application being fraudulent. In fact, those who are not registered to vote can have an average credit score significantly below the pass level. Non-UK applicants who are not eligible to vote are usually still able to rent if they have a UK guarantor who passes the credit and referencing checks.
• Make sure your details are up to date and correct
Keeping regular track of your credit report means that if you spot any mistakes you’ll be able to rectify them. It’s critical that the data held on you is accurate and up to date, and you can check the details held by each Credit Reference Agency. So check for old addresses, cancel unused credit and store cards, and make sure there are no unfair defaults on your file. If you find a fault on your credit file and think it’s out of date or unfair, you can submit a data dispute to the relevant agency, so they can investigate and update their records accordingly. You should also financially de-link from someone you no longer have joint finances with - this could be from a house share or a relationship split. You’ll need to notify the agencies and ask for a notice of disassociation.
• Make regular payments on time and pay off existing debit balances
Lenders and service providers will report arrears, missed, late or defaulted payments, and if you go over your agreed credit limits. Some missing payments can stay on the record for six years or more. Paying your bills on time therefore demonstrates your financial reliability and shows that you’re responsible when it comes to managing credit. Managing your accounts well and over a long period of time can help to build your credit history and improve your score. Even your mobile phone contract, utility bills, your TV and other subscriptions can count. Reducing your debt also makes it more likely that lenders will offer you credit when you make another application.
• Use a free eligibility calculator to minimise credit applications
As you don’t know whether you’ll be accepted before you apply for a product, this can reduce the risk of being rejected and of having to make multiple applications. Every application you make leaves a mark on your credit report that lenders could see. Eligibility calculators use what’s known as a ‘soft search’ which won’t hurt your credit score as it leaves no impact, and allows you to see whether you’re likely to be accepted before you apply.
• Time your applications carefully
Every application adds a footprint to your file for the next year, even if it’s just a mobile phone contract or paying car insurance monthly. If possible, prioritise the most important applications and space them out. Too many applications over a short period of time might even look suspicious to lenders. If you know that a significant life change is coming up, such as going on maternity leave, then it may be a good idea to apply well before the event. Be consistent with the details on your applications, for example make sure to use the same email address and phone number each time.
• Keep tabs on your credit file for fraudulent activity
Identity fraud happens when someone steals your personal details and uses them for financial gain. If someone fraudulently gains access to your personal details, they could take out credit in your name without your knowledge. It’s advisable to check your credit file regularly to make sure there’s nothing wrong, such as an application you don’t recognise or new searches. If you do spot anything you’re concerned about on your credit report, contact the lender/s directly or the Credit Reference Agency who will be able to help you query all the relevant entries.
• Keep your credit utilisation low
Your credit utilisation is the percentage you use of your credit limit. If you only use 50% of your available credit, lenders will usually see this as more positive than using up most or all of your limit. Credit Reference Agency Experian suggests trying to keep your utilisation below 30%. Try not to miss any payments or spend up to your credit limit. Make every effort to pay on time.
• Avoid using your credit card to withdraw cash
As well as being a more expensive way to take money out, lenders view this as evidence of poor financial management and could suggest you’re reliant on credit.
This article does not constitute financial advice and you should contact a professional expert for further guidance.
You can read more about Rent4sure’s referencing service here.
Building and maintaining your credit score is an essential part of financial health
Credit reports are used by lenders to help them make a decision on whether or not to offer you credit, along with a number of other factors that can vary from lender to lender. The file shows your financial history - for example, how much debt you have, whether you’ve missed any payments, and if you’ve had any County Court Judgements filed against you.
Reports don’t just impact your ability to rent a property, get a credit card or loan, but can also affect many of the other financial products you rely on - such as monthly insurance, mobile phone contracts, car loans and banking products. The lower your credit rating, the less chance you have to access the financial products you need. You may also find yourself subject to poorer terms than others with a higher credit score.
Ill health, caring responsibilities, a change in work or personal circumstances, can all impact someone’s finances through no fault of their own. This won’t necessarily harm your credit score or reports, but your credit history could be affected if you fall behind on loans or credit card payments.
Can you afford to pay the rent?
With 4.43 million households occupied by private renters in England, renting is on the increase and demand currently outstrips supply. When you apply to rent a property, the landlord will want evidence that you can afford to pay the rent.
The industry standard affordability ratio requires tenants to earn 2.5 x and guarantors 3 x the monthly rent each month. Some landlords will allow leeway on this, and rent share is also taken into account.
A credit check may well be part of the referencing process a prospective landlord carries out, but you can rest assured that being referenced won’t affect your credit score.
Credit checks are one of the measures used by many letting agents and landlords to assess an applicant’s suitability for renting a property, and scores take into account a number of factors including borrowing history and financial associates.
What does a Credit Reference Agency do?
There are three main Credit Reference Agencies in the UK - TransUnion, Equifax and Experian. These independent organisations compile information on how well you manage credit and make your payments. Lenders use this information to make a decision about whether to offer you credit and on what terms.
By law, all CRAs have to provide you with a copy of your credit report for free. As there may be a difference in some of the information each agency holds about you, it’s usually worth getting a copy from all three CRAs in the first instance or if it’s been a long time since you last checked.
It’s important to note that a credit score is different from your credit report. Each credit agency will give you their own ‘score’ broadly based on your application form, your credit report and any information they have about you already. This score isn’t definitive, but it will give you a good idea of what lenders might see. What you need to look more closely at is the information they hold about you in your file.
You can find out more about credit ratings, reports and scores, here: https://www.moneyhelper.org.uk/en/everyday-money/credit-and-purchases.
When you apply for credit the lender tries to predict your future behaviour from your past financial history, so it’s a good idea to find out your rating and - over time - try to improve it if necessary.
The decision to let
Although Rent4sure is responsible for carrying out the referencing checks, it’s your letting agent and/or landlord who will make the decision to let. However, if you have any questions about the referencing process, or just want to talk anything through with us, then please do get in touch. We’ll be happy to help.
How can I help boost my credit score
• Make sure you’re registered to vote
Getting on to the electoral roll is a major factor in boosting a credit score and provides valuable proof of address. Credit agencies see it as a positive sign, because not being registered increases the chances of the application being fraudulent. In fact, those who are not registered to vote can have an average credit score significantly below the pass level. Non-UK applicants who are not eligible to vote are usually still able to rent if they have a UK guarantor who passes the credit and referencing checks.
• Make sure your details are up to date and correct
Keeping regular track of your credit report means that if you spot any mistakes you’ll be able to rectify them. It’s critical that the data held on you is accurate and up to date, and you can check the details held by each Credit Reference Agency. So check for old addresses, cancel unused credit and store cards, and make sure there are no unfair defaults on your file. If you find a fault on your credit file and think it’s out of date or unfair, you can submit a data dispute to the relevant agency, so they can investigate and update their records accordingly. You should also financially de-link from someone you no longer have joint finances with - this could be from a house share or a relationship split. You’ll need to notify the agencies and ask for a notice of disassociation.
• Make regular payments on time and pay off existing debit balances
Lenders and service providers will report arrears, missed, late or defaulted payments, and if you go over your agreed credit limits. Some missing payments can stay on the record for six years or more. Paying your bills on time therefore demonstrates your financial reliability and shows that you’re responsible when it comes to managing credit. Managing your accounts well and over a long period of time can help to build your credit history and improve your score. Even your mobile phone contract, utility bills, your TV and other subscriptions can count. Reducing your debt also makes it more likely that lenders will offer you credit when you make another application.
• Use a free eligibility calculator to minimise credit applications
As you don’t know whether you’ll be accepted before you apply for a product, this can reduce the risk of being rejected and of having to make multiple applications. Every application you make leaves a mark on your credit report that lenders could see. Eligibility calculators use what’s known as a ‘soft search’ which won’t hurt your credit score as it leaves no impact, and allows you to see whether you’re likely to be accepted before you apply.
• Time your applications carefully
Every application adds a footprint to your file for the next year, even if it’s just a mobile phone contract or paying car insurance monthly. If possible, prioritise the most important applications and space them out. Too many applications over a short period of time might even look suspicious to lenders. If you know that a significant life change is coming up, such as going on maternity leave, then it may be a good idea to apply well before the event. Be consistent with the details on your applications, for example make sure to use the same email address and phone number each time.
• Keep tabs on your credit file for fraudulent activity
Identity fraud happens when someone steals your personal details and uses them for financial gain. If someone fraudulently gains access to your personal details, they could take out credit in your name without your knowledge. It’s advisable to check your credit file regularly to make sure there’s nothing wrong, such as an application you don’t recognise or new searches. If you do spot anything you’re concerned about on your credit report, contact the lender/s directly or the Credit Reference Agency who will be able to help you query all the relevant entries.
• Keep your credit utilisation low
Your credit utilisation is the percentage you use of your credit limit. If you only use 50% of your available credit, lenders will usually see this as more positive than using up most or all of your limit. Credit Reference Agency Experian suggests trying to keep your utilisation below 30%. Try not to miss any payments or spend up to your credit limit. Make every effort to pay on time.
• Avoid using your credit card to withdraw cash
As well as being a more expensive way to take money out, lenders view this as evidence of poor financial management and could suggest you’re reliant on credit.
This article does not constitute financial advice and you should contact a professional expert for further guidance.
You can read more about Rent4sure’s referencing service here.