The ultimate guide to tenant referencing
Did you hear the story about the London tenants who changed all the locks and then stopped all contact with the landlord? What about the landlord who was faced with a pungent odour after the eviction of his tenants? When he tried to find the source, he discovered rotten, raw meat had been stuffed into the wall cavities? Yuck!
And who hasn't watched rogue landlords, nightmare tenants? It's enough to make you lose faith in humanity. From bonfires in living rooms to flooding apartments out of spite, there is an abundance of horror stories from landlords that will make you squirm. It's no wonder landlords are becoming more and more picky when it comes to choosing a tenant for their property.
If you are reading this you have likely secured a firm offer for your rental property. Before you accept it, it is advisable to perform a tenant reference check. In fact, 97% of all landlords will complete some form of tenant referencing before they sign any contracts.
In this article we answer these key questions about tenant referencing.
What is tenant referencing?
Why is tenant referencing important?
How long does it take?
What is the tenant referencing process?
What does a tenant reference report contain?
How much does it cost and who pays?
What Is Tenant Referencing?
Tenant referencing is the process of verifying a rental applicant's suitability. It basically enables landlords and letting agents to find out more about rental applicants so they can make an informed decision before signing a contract.
There are various levels of references available, depending on the desired level of thoroughness. Contrary to popular belief, tenant referencing isn't just credit history checks. While useful, credit checks are the most basic form of due diligence; the most comprehensive reference checks involve verifying identity, right to rent, credit history, rental history, source of income and affordability. The results will allow you to determine if the tenant is reliable and responsible.
Why Is Tenant Referencing Important?
As a landlord, your primary objective is to generate rental income from your property. Therefore, a non-paying tenant is THE biggest risk to your business. Evicting a tenant takes on average 7 months in the UK. That is 7 months where you are not receiving any income and this was before the COVID-19 eviction ban! It will no doubt be longer now. There are also the eviction related costs such as court fees, legal fees and bailiffs to consider. These costs can be in excess £4,000. Doing your due diligence on a tenant via tenant referencing is a great way of reducing the risk of onboarding an unsuitable tenant.
How Long Does It Take?
Depending on the process itself, a credit check could take anywhere from a few minutes, to a few days. Background and reference checks generally take longer than financial checks, which you may have access to within minutes.
What is the Tenant Reference process?
The tenant referencing process begins with the tenant providing information about their circumstances. This is usually done by way of filling out an application form and declaration of honest representation. The purpose then of the reference check is to verify the information provided to the landlord/agent is true.
What Does A Tenant Reference Report Contain?
A comprehensive tenant reference will verify:
credit history
rent payment history
income
affordability
identity & right to rent
credit history
The first thing to note here is that tenant credit checks do not show the same level of information as you would see if you are looking at your own credit report on platforms like clearscore and credit karma. Tenant vetting information is limited to big ticket items - County Court Judgements (CCJs) and Bankruptcies and Insolvencies; previous addresses, fraud alerts and aliases. This is the absolute basic that a tenant reference will contain.
What are CCJs?
CCJs, or County Court Judgements, are legally binding court judgments stating that debt is owed and must be repaid. A creditor who believes they are owed money that hasn't been repaid can submit a claim to the courts. If the court agrees, they'll issue a CCJ against the debtor. Unless the debt is paid in full within a month of the judgement being made, a record of it will be entered into the Register of Judgements, Order and Fines where it remains for six years (even after it has been paid in full). The record will also go into the debtors credit file and affect their ability to obtain credit in the future.
Any tenant who has been court ordered to vacate a property by a judge for not paying rent will appear on this register if the landlord makes a claim against them. The register is public information so anyone who checks the register, will be able to find out the name and address of the person who the claim is against, as well as the case number and court number, and the amount owing. Note however, that you will not be told the reason for the debt. You will need to ask the tenant about it and trust them to be honest.
Note however, that the presence of CCJs does not necessarily mean that your tenant will be a bad one. We encourage you to speak to prospective tenants about their financial history to understand what went wrong and if they are back on track. Many renters who fall behind on credit commitments are diligent in their rent payments.
Conversely, the absence of CCJs doesn’t mean you have found a great tenant. The main reason for that is that many landlords who are faced with a problem tenant choose to simply forgo the money owed in order to obtain an accelerated eviction. This means that there will be no record of the wrongdoing.
This does not mean that you should forgo this check, you should however treat it as a conversation starter.
rent payment history
Now that you are sure your tenant is not in serious financial difficulty, you can now turn your attention to rental payment behaviour. This covers if they paid their rent in full and at the agreed upon frequency. Naturally, only the tenant and landlord can provide insight into rental payment behaviour. However, a full account of payments can be found in bank statements.
It is important to note that about half of tenants have never been asked to produce bank statements as part of the tenant referencing process and a similar number will refuse as they find it intrusive. In our experience, the more well off a tenant is, the less likely they will be willing to share bank statements directly with landlords or agents.
As an alternative (or as an add on) to bank statements, reference checks can involve speaking to current and previous landlords. This check usually takes the longest amount of time to get a response, if at all. Mainly because landlords and letting agents are busy and providing references is not a priority to them. Perhaps this is something to bear in mind the next time you are asked to provide a reference!
If you are performing the reference yourself, here are a few questions you could ask current / past landlords:
What is the address?
How long was the tenant at the property?
Was anyone else on the lease?
What was the rent amount?
Did they pay rent on time?
Did they maintain the property?
Were there any damages?
Did they have pets?
Why did they leave?
Would you rent to them again?
It is also a good idea to give applicants a chance to comment on the feedback you have received, especially if a falling out precipitated their move. Communication is key in any landlord-tenant relationship.
income verification
There are many sources of income for a tenant: employment, self-employment, pensions, savings and independent means. Whatever the source, tenant referencing verifies the information provided by the tenant. The reasons for income employment verification are simple: it ensures you know your prospective tenant is employed, and therefore, is able to pay rent. Employment verification is as simple as either emailing or phoning the tenant's employer. We recommend the phone because it's easier to read the answers when you can hear the tone in the voice of the person you're speaking to. For this part of the process, it's important that you verify a few things, including the length of time the tenant has worked for the company, what they do, the salary they make, and whether or not they are a responsible employee.
If there are any discrepancies between what the tenant has in their application compared to what their employer says, it could be a red flag. Other red flags include a fake reference, and if the employer does not speak highly of the tenant.
Questions for employers:
Can you confirm the tenant is/was employed at the company?
What is their monthly salary?
How long have they been working for the company?
What is their role?
What are the employment terms? Is there a contract in place?
income and affordability
We are now getting to the nitty gritty. Simply, this tells you that the tenant has an income and that it is enough to cover the rent, bills and general living expenses. The latter part is very important as even if an applicant has a high income, if their living costs and debt is equally high, then they might struggle to pay the rent. It doesn't necessarily mean that the applicant will be a bad tenant, just that they may not stay in your property long. Struggling with monthly bills is not a good way to live. It is best to be realistic with them and yourself from the onset. If you are unsure, don't be afraid to ask for a guarantor.
identity & right to buy
It is always a great idea to know exactly who you are trusting with your very expensive investment. At the very least, if something goes wrong and you have to take legal action, you should be confident in their identity.
Additionally, you must fulfil your right to rent obligations. The UK government requires that landlords act as mini immigration agents and verify an applicant's right to live in the UK which they have cleverly coined as the right to rent check. This part is not usually included in a tenant reference check but is nonetheless part of official landlord obligations. Unfortunately, this means that you have to keep up to date with legislation. Failing to do so will lead to hefty fines and possible jail sentences.
It is important that while performing a right to rent check, you do not fall foul to discrimination laws. This means that you should not dismiss tenants that you perceive may be foreign for any reason. Data shows that migrants are the best tenants in terms of paying rent, keeping up the property's standard and duration of tenancy. So, don't miss out on this group of applicants.
Husmus users get this verification done as part of their Pro tenant reference package. We check photographic identification documents (passports, biometric identity cards) from more than 190 countries for authenticity, meaning you do not have to worry about being misled.
How Much Does It Cost And Who Pays?
Reference checks vary in costs depending on the level of search. Expect to pay from £8 for a basic search and between £25 - £140 for a comprehensive search. Remember that in accordance with the tenancy fee act landlords can no longer pass these costs on to tenants. It is possible for you to complete tenant referencing checks yourself but it can be time-consuming; and it's much easier and safer to have an experienced company complete these tasks. Check out No letting go’s blog for a great list of the best tenant referencing companies.
Husmus provides three tenant referencing packages depending on how thoroughly you want to investigate your prospect:
Basic: credit check, inclusive of CCJs and bankruptcy; and background check, including linked addresses and aliases.
Basic+: a credit check, background check, as well as landlord references from the current landlord or managing agent, and Right to Rent check to ensure they are eligible to rent and comply with legislation.
Pro: credit check, background check, landlord references, Right to Rent check, employment check to confirm employment, and affordability check to determine rent affordability based on the applicant's salary.
Our methodology relies on authenticating documents and getting statements directly from the bank which helps us avoid any photoshop fraudsters. Our reports are delivered instantaneously and contain all the information you need to make an informed decision.
What next?
A reference report will usually give you either a score or recommendation. The choice to take a tenant on is ultimately yours, however armed with all of the information above, you can make an informed choice. An applicant should be looked at as a sum of all the parts. How forthcoming where they, were they organised and proactive, were you comfortable with them? All of these things paint a picture and should inform your decision making.
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