In This Guide

Administration

   1. Holding deposits

   2. Referencing tenants

   3. Credit checks and guarantors

   4. The inventory

   5. The bond and rent

   6. Landlord's checklist

Being a landlord

Buy to let investment

Choosing the property

Finding tenants

Letting property

Lettings agents

Levels of service

Preparing the property

Problem tenants

Tenancy

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Administration

Credit checks and guarantors

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As with the process of referencing, landlords use credit checks in order to help vet tenants as thoroughly as possible. It might seem like prying to some people, but really you are just looking out for your interests. As long as the tenant is aware of and prepared for the fact that you are going to be credit checking them, there is no harm done.

The credit check will access data held by one of the major credit agencies, such as Experian or Equifax. There are two levels of credit searching - a credit enquiry and a full credit check. Some services use a credit enquiry, which searches the Credit Register for debt-related county court judgements against the tenant at his current and previous addresses. Other services will use a full credit search, which gives a statement of any debts and regular payments that are known to the register, along with arrears history and other information.

Like the references, this activity is aimed at trying to find out how reliable a prospective tenant is, by looking at their past record for paying debts on time. A poor track record does not necessarily mean you should refuse a tenant, just as an unblemished history does not always mean a tenant will not default this time round. Use your judgement of the individual, the references, the experience of the lettings agent, and your gut feeling towards the tenant as well as the information contained within the credit search.

There are specialist services which combine the credit search with a reference and background check and give you a recommendation on whether the experts feel a candidate would make a suitable tenant. This is a handy package, which most estate agents now offer.

There are lots of reasons why a tenant may be a borderline case when it comes to credit and reference checks. They may have changed address extremely frequently in the last 3 years, had a somewhat unimpressive credit history, or possibly not earn all that much money. When such circumstances occur, it can be advisable to require a guarantor for their tenancy if you decide you want them in the property.

Essentially, using a guarantor means that in the event of a tenant being unable to meet their obligations under the tenancy agreement, whether it is for overdue rent, damage to the property or whatever, the Guarantor is legally bound to accept the liabilities on behalf of the tenant.

This means you have a kind of insurance policy against the tenant defaulting on the rent. The guarantor must usually be a homeowner that does not themselves fail a credit inquiry and is therefore probably in regular employment. A person would not provide much of a guarantee if they were themselves unable to make a payment should the circumstances require it.

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