Tenant referencing is a process involving a number of checks done by landlords or letting agents to confirm the reliability and credit worthiness of prospective tenants. These checks are done with a number of factors put into consideration. These factors are;
Poor Income To Rent Ratio:
This shows that the salary of the potential tenant is enough to pay the expected rent regularly. Landlords and letting agents usually work with a 2.5 ratio; meaning the gross salary of the tenant should be at least 2.5 that of the rent, taking into account other expenses the tenant will probably have.
Credit checks could show details on past rentals, addresses, or if money was owed. Some of this information could be used to contact past landlords or letting agents. Landlords and letting agents usually ask for references from previous landlords. At this point, they look out for tenants with histories of property damage, late payments, and other relevant information. In situations where there were issues with the tenancy, landlords may refuse to provide referencing or ignore the request for referencing.
Breaks in employment are one of the factors landlords and letting agents look out for. Regular breaks within a period of about one year or six months usually stick out like a sore thumb and have question marks written all over them. Short-term employment is also considered questionable – what happens after the employment is over, are there any other jobs lined up, or does the prospective tenant have a history of short-term jobs, and did they ever affect tenancy in the past?
Credit checks could reveal consistency, borrowing and timely repayments over a period of time. A good payment history goes a long way in a landlord’s eyes.
Information On Bankruptcy
Bankruptcy remains on an individual’s credit report for about 10 years. Landlords check for discharged bankruptcies and pending bankruptcies. Unlike discharged bankruptcies, pending bankruptcies always bear the possibility of the tenant being relieved of all financial duties, not excluding owed rent.
Debt Load Status
A credit check will show the landlord how much the tenant owes. A tenant with a huge debt load will have more financial obligations and may seem too much of a risk for a landlord.
It is important to note that credit checks cannot be done without the permission of the prospective tenant.