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What Should I Do with a Failed Tenant Reference Check?

Flex Living handles hundreds of tenant issues every day, so here's our advice on what to do when a tenant fails a reference check.
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Tenant referencing can be a tedious process requiring countless checks and documents. Let’s say you’ve finally compiled the necessary verification measures and questions to ask your potential tenant, but they’ve failed to pass one or more checks. Our property management experts at Flex Living deal with tenant verification daily, so we’ll show you what to do if you have a tenant reference check fail. If you want to avoid dealing with failed tenant reference checks in the first place, we offer some advice on finding good, trustworthy tenants in our How to Find Tenants article.

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In this article, we are going to discuss :

What Does a Tenant Reference Check Involve?

A tenant reference check includes various checks and verifications of a potential renter to help landlords decide whether this person is suitable for their property and can pay consistent rent. You can either complete these checks yourself as a landlord or enlist the help of a professional tenant referencing company such as OpenRent, Rentguard or HomeLet. For more information on what a tenant reference check is and how to complete it, please read our article on Tenant Referencing.

How Can a Tenant Fail a Reference Check?

There are two parts to the tenant vetting process – character and ability to pay rent.

As such, a tenant can fail a reference checking two main ways:

1) Poor character reference (e.g., from a previous landlord or employer) and/or;

2) Failed credit checks or ability to show affordability (i.e., that they can pay rent in full and on time every rent payment period)

What a Failed Tenant Reference Checks Tell You

If a tenant cannot provide you with a reference from at least one previous landlord who can vet their good behaviour and rent payment history, it could be a warning not to invite this tenant into your home. There are, of course, situations where tenants will have no previous landlord to provide a reference (e.g., first-time renters); in these cases, it’s appropriate to seek an employer reference or ask for a guarantor. If a tenant cannot provide an employer or landlord reference, you could also conduct an informal interview to get to know them better, asking questions such as:

  • Where have you lived in the past?
  • Have you ever lived alone?
  • Are you tidy?
  • Do you have any issues or commitments that might impact your ability to pay rent on time?
landlords having discussion about tenant reference check

What About Failed Credit Checks for Renting?

A failed credit check for renting reveals a tenant’s poor credit history. The main red flags to look out for are failed checks due to payday loans or default on debt.

However, a low credit score is not the be-all and end-all. In fact, the UK’s credit history industry tends to lower credit scores for relatively minor infringements that don’t have much influence on whether or not a person can rent a property comfortably. For example, even one late payment can cause credit scores to plunge (and a singular late payment is certainly not an all-encompassing judge of someone’s character!). By the same token, if your prospective tenant doesn’t have any loans or credit cards, they may also return a low credit score. 

Many young tenants hold well-paying jobs yet have low credit scores because they’ve never had any debt (or even forgot to pay a parking ticket on time!). Ultimately, ensure you look at failed credit checks flexibly and in the context of other references.

Negative feedback related to banking statements could signify poor money management. If the tenant’s income is less than two times the rental amount, they may struggle to pay rent on time each month. However, you should consider other banking factors. For example, despite having a low income, the tenant could have ample savings they can use to supplement their rental payments.

A tenant who fails to provide proof of address may result in a failed credit check. However, there may be legitimate reasons for this information exclusion. For example, perhaps the tenant has just moved to the UK and hasn’t had an address in the country yet.

Failed Tenant Reference Check: The Next Steps

Running background checks on tenants is a foundational component of successful tenancy management – what should a landlord do if a tenant fails? Many professionals can help you deliver referencing verification checks, but few tell you what to do with the outcome of these checks.

If your tenant’s credit check returns immediate red flags such as payday loans or default on debt, or if they’re character references are poor, we suggest finding another tenant.

However, if your tenant has failed one or two minor checks within the broader referencing process, you may still want to consider them as a suitable tenant. To put your mind at ease and add some monetary protection, you can ask your tenant for the following things:

1. A higher deposit

If a tenant fails certain aspects of your referencing process, you might still allow them to rent your property on the condition that they pay a higher deposit fee as a ‘high-risk’ tenant.

2. A guarantor

A rent guarantor is a person or company that agrees to pay the tenant’s rent or other property-related costs if they cannot pay it. As a landlord, you have the right to request a guarantor if you think there is any risk your tenant may not be able to pay their rent consistently and in full. 

A suitable guarantor must satisfy the following conditions:

  • Have residence in the UK
  • Have a good credit history
  • Have sufficient income to cover their own living costs + the tenant’s rent

You can also ask your tenant to explain their credit situation. Perhaps their bank statements show low income because they’ve been travelling and not working but they have ample savings they can use to supplement their rental payments for the time being.

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Should I Rent to a Tenant Who Fails a Reference Check?

While there is no legal requirement to say you cannot rent to a tenant who has failed their referencing checks, you should be cautious. Ensure you consider the risks of renting to a tenant who has failed certain checks. 

Ultimately, the most important thing is to consider all individual references in the context of every other reference and make a balanced judgement. If in doubt, ask your agent if you can speak to the tenant directly so you can get a better sense of who they are and if they will respect your property. Trust your gut – you can usually get a sense of who will be a good tenant and who might be prone to causing trouble! Read our article on tenant referencing for a comprehensive guide on what information to request from your tenant.

How to Check Tenant References

You can enlist the help of a third party to check your tenant references for you (i.e., your letting agent or a professional referencing company). If you want to check tenant references yourself (perhaps to save on cost or even just to have more control over the process), it’s best to create or download a checklist with a list of documents to ask your tenant for.

For a typical tenancy reference, these documents might include:

  • Recent bank statements
  • Bank account details
  • Proof of employment (e.g., recent payslips)
  • Employer reference
  • Previous landlord or agent reference
  • Proof of previous address
  • Proof of identity
  • Right to rent documents (see the UK Government website to see which documents are acceptable)

Free Tenant Checking

If you don’t have enough time to do comprehensive tenant referencing yourself, or don’t want to pay for a professional referencing service, consider renting your property out through Flex Living. Through a corporate let model, our property management services offer professional tenant vetting. Professional tenants are lower risk, so we ensure you receive guaranteed rent every month without a fuss. 

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