Hazards of using a tenant referencing service

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    Hazards of using a tenant referencing service

    I've used {Mod - company name removed} through openrent to perform "full" referencing on a prospective tenant. The reference report came back positive - reccomending I proceed without need for guarantor etc.

    I was tempted to proceed but still slightly uneasy due to the income being on the 2.5x rental threshold so requested recent bank statements. These left me uneasy again when I saw the number of debits for credit cards and personal loans. So i requested a copy of an Experian report from the tenant directly.

    Turns out the tenant has almost 5 figure debt and worse has been growing rapaidly and consistently for the last year or so. It seems black and white to me that this is a terrible prospect as ever-growing debt is being used to fund day to day living. This is totally unsustainable and i don't want this proverbial to hit the fan while they are renting my property.

    So it seems the referencing has totally failed me. Worse I could have proceeded after they rubber stamped it - and i suspect many would have done. I'm not sure this issue is solely limited to {Mod - company name removed} though. I've made a few inquiries to alternative companies (including the recommended tenantverify) but it seems none disclose total debt level (unless there are CCJs).

    I know that online referencing is never going to cover every single minuscule factor but a substantial and ever growing debt-to-income level should surely be flagged if not cause an outright fail.

    So my questions:

    1- Are there any tenant referencing agencies who do disclose debt levels?

    2- Whats the best way to identify /weed out individuals with high debt? (it seems intrusive to ask for an experian report for an apparently good prospect esp as they have already had a credit check!)

    3- Which referencing agency do you use/prefer and why?

    #2
    For 2 you've done very well yourself. If you've done it once I'd never be embarrassed about doing it again, as a matter of course.

    Comment


      #3
      You/they can use noddle for free and quickly to get a credit report. If they think it's intrusive while wanting to stay in your asset worth £xx then maybe they're not right to have it in the first place.
      "I'm afraid I didn't do enough background checks apart from checking her identity on Facebook" - ANON

      What I say is based on my own experience and research - Please don't take as gospel without first checking the gospel yourself.

      Comment


        #4
        This is quite worrying for me. I use the same referencing company and have never bothered supplementing it with my own independent credit check . I would also be grateful to know if anyone has experience of a referencing agency that does more comprehensive checks.

        Comment


          #5
          Well, NLA have basic & full..
          https://www.nlatenantcheck.org.uk/services.aspx
          as do many others...
          https://www.openrent.co.uk/tenant-referencing
          &
          https://homelet.co.uk/landlord-insur...nt-referencing

          When I run checks (In Scotland the landlord pays, it is unlawful to charge the tenant..) I use the "full" version from NLA or similar.

          Suggest you look & see what each of the services you are considering using actually checks.

          IMHO the check to do yourself is a reference from his previous landlord (in addition to that from his current landlord). It is not unknown for the current landlord to give a great reference to get rid of a bad 'un....
          I am legally unqualified: If you need to rely on advice check it with a suitable authority - eg a solicitor specialising in landlord/tenant law...

          Comment


            #6
            If you look at the info on Openrent about referencing, it states that whoever does the referencing includes a report from Experian, which is where you say you got the heads-up that your applicant was a bad 'un. So I would be asking questions there, I think.

            Comment


              #7
              Only creditors (not landlords or letting agents) are entitled to information on your credit report other then public information such as CCJs & bankruptcies. So any credit check done as a tenant check won't tell you any more then that.
              The only way of knowing any more would be to ask the potential tenant to provide it.

              Comment


                #8
                http://www.experian.co.uk/consumer/q...kjames344.html

                Comment


                  #9
                  OK thanks. Sounds like I should be asking for copies of bank statements so that I can follow up with questions if necessary.

                  Comment


                    #10
                    Thanks for the replies.

                    theartfullodger- my point being that "full" doesn't mean full.

                    I've done some ringing around and it appears that none of the referencing agencies will pass on any kind of debt level information. Some of them claim to take it into account but I'm not at all convinced they really do. This applicants case should have been a fail.

                    What it appears we have here is a gaping hole in the referencing/credit scoring system. If a tenant has a good payment history but is in a downward spiral towards defaults, CCJ and bankruptcies then the system doesn't even flag it.


                    Originally posted by Ericthelobster View Post
                    If you look at the info on Openrent about referencing, it states that whoever does the referencing includes a report from Experian, which is where you say you got the heads-up that your applicant was a bad 'un. So I would be asking questions there, I think.
                    The report that I got obtains credit information from Equifax, the Tenant provided their report from Experian.

                    The key thing is that the report that an individual can get about themselves has crucial information about their borrowing level which the referencing agencies don't get. I was speaking to a guy at Tenantverify (very patient helpful chap) and apparently the debt level is only available to lenders. This repeats carolines100 point.

                    This has got me thinking the flaw here is that in effect as a landlord you will at times become an involuntary lender to your tenant when then stop paying and legislation means you can't immediately cease to provide accommodation for them (ie throw them out straight away). As such I think as landlords we should be pushing to get this information from referencing agencies. Anyone agree?

                    Until any such change I think the way forward is ageny check then 3 months bank statements to get an understanding of spending and see any personal loan/credit card payments. If everything looks fine then let to applicant but if you see gremlins then request experian/noodle report before considering them further.
                    Is this how others approach it?

                    Comment


                      #11
                      You can ask the tenant to sign up to Noddle (which is free), which gives details they can print out.
                      When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
                      Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

                      Comment


                        #12
                        One point worth noting is that if they do pass credit and affordability checks etc you can get rent insurance against them which should pay out for 6 months and court costs etc

                        Comment


                          #13
                          Originally posted by blinko View Post
                          One point worth noting is that if they do pass credit and affordability checks etc you can get rent insurance against them which should pay out for 6 months and court costs etc
                          Yes, thanks, I was wondering about that option. Seems to me it might help in certain scenarios but I guess there might be others where its of no use.

                          Ie you'll be covered during the 6/12 month fixed term but if you go into rolling you wont be. Presumably you can re-reference and issue a new AST at the end of the fixed term but if the tenants circumstances have changed and they fail you could still end up stuck with them in the property not paying rent and with no insurance cover.

                          Any way to protect yourself against those outcomes?

                          Comment


                            #14
                            I think the idea behind this thread is sound, but we have to - at least I think - understand that this is not a person applying for a 25 year mortgage.

                            When you do that, you expect that the application process will cover your incomings, your outgoings, debt levels, certainly CCJs and all that. The Underwriter will then mark that against some criteria and they'll lend - or not - based on their policies and how you size up.

                            Someone applying to rent a property is not in the same position as someone applying for a mortgage - their income will be assessed for whether it can pay the rent, there'll be a highlighting of any CCJs of course... but going to the level of asking about debt levels is something that I've never seen.

                            In a way a person's debt is also a personal thing. I think the Landlord holds the cards because they don't have to let a property to someone, of course, but it's mainly about income, history (the CCJ angle) and suitability that will get someone into a position to be able to rent a property. We have to understand that, yes, the Landlord could be opened up to risk, but there's a (supposedly) short route to removing the Tenants if it all goes wrong - eviction. A Tenancy, I feel, isn't in the same league as a mortgage... therefore the checks are going to be less invasive / stringent / complete.

                            If a Landlord wants to go above-and-beyond then I'd support that, as it makes sense... but it could obviously put some people off.

                            Comment


                              #15
                              It's a bit of a minefield.
                              Young people tend to have almost no credit history at all - they tend to score medium/average, but when you look at the detail, there's nothing there at all.
                              When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
                              Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

                              Comment

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