Almost half of landlords (46%) would refuse an application from a new tenant if they had a poor credit score, new research has revealed.
Half of Landlords Would Refuse Tenant over Poor Credit Score
However, credit histories do not currently form 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.
Typically, letting agents rely heavily on publicly available information, such as County Court Judgements (CCJs) or declarations of bankruptcy, which can give some insight into a tenant’s previous financial footprint, but not the full picture of their current situation.
The fact that landlords put so much weight behind a credit score suggests that the market needs to make this check a normal part of the tenant application process.
According to a new industry report from tenant referencing agency Landlord Secure, 48% of landlords would refuse to sign a tenancy agreement with a tenant who had been subject to a CCJ in the past, while 42% would reject an application from a tenant with past insolvency issues.
Applicants with existing debts, like credit cards or loans, would raise red flags for 30% of landlords, while those in receipt of housing benefit wouldn’t be accepted by 19% of landlords. 16% of landlords wouldn’t accept tenants on Universal Credit.
Although rent payment history does not currently form part of a tenant’s credit score, there are increasing calls in the industry for this to become the norm, so that 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.
The Managing Director of Landlord Secure, Steve Burrows, says: “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.”