UK landlords cautious about tenants with poor credit rating

Yet another interesting dimension is emerging out of the UK housing crisis with the latest survey revealing that tenants with poor credit rating are more likely to be shunned by landlords.

Having access to the credit scores of tenants would be a crucial factor for landlords when deciding who to sign an agreement with, as they would be likely to favour an applicant with a better credit score if they were renting a property, according to ‘Rental Market Research Report’ prepared by tenant referencing and insurance agency, Landlord Secure.

This is a major concern, as thousands of households, who are unable to climb up the housing ladder, are depending on the rented sector. The number of households in the private rented sector has more than doubled since 2001, according to research by PwC, rising from 2.3m to 5.4m just a few years ago. It is widely expected that this trend will continue and by 2025 the number of people renting their home could reach 7.2m.

Landlords, however, are increasingly getting worried over rent arrears from tenants, especially those with a poor credit score. Consequently, the landlords are keen on letting their properties to tenants with a good credit history. The survey reveals that a tenant’s poor credit history would be enough for 46 per cent of landlords to reject an application, while 48 per cent would instantly reject an applicant, who had been subject to a county court judgement in the past.

Further highlighting the expectation gap on credit checks of an applicant, 40 per cent of landlords would expect to be told if an applicant had a red flag against their credit score before agreeing to a lease agreement. A further 34 per cent would even expect an applicant’s guarantor to undergo the same level of extra checks and would want to be informed of the guarantor’s credit score as well.

Incidentally, the landlords want to link the tenants’ credit history to their earnings. According to the research, nearly one in five landlords (19 per cent) would expect any potential applicant to have a wage more than £30k per annum, with nearly one in 10n expecting any applicants to be earning between £50k and £100k a year.

This is a worrying trend considering the average wage in the UK is £26,500 and that many people will be earning less than this when applying for a rental property. It seems that those wanting to rent out a property are extremely risk averse when it comes to potential tenants and could have unrealistic expectations on the earning potential of those in the market.

Source: Landlord Secure Risk Report