What is a Credit Check?
A credit check is a simple process that takes place everyday. People are credit checked for all sorts of things from buying a mobile phone to buying a car. A tenant credit check is much the same – it safeguards your property investment by checking a tenant’s financial responsibility.
You’d never knowingly let a tenant move into your property with a promise of “I’ll pay you later”. By securing a tenant credit report you can make sure your tenant will pay on time based on past financial history.
What does it all mean?
A credit score is really just a prediction on how a tenant is likely to behave. The score is pulled together from a few different factors – whether the tenant is on the electoral register, if they have any CCJ’s and if they have any past bankruptcies or insolvencies.
Most credit reports will look at whether a tenant is on the electoral register and this can tell us quite a lot. Credit reference agencies will use the information on the electoral register to verify a tenant’s identity and prevent fraud. If a tenant is not registered then they appear not to exist with no credit record, this can have a very negative influence.
CCJ stands for County Court Judgement and they appear on a credit report if a tenant has owed money to a creditor in the past. These records are kept on a tenants credit report for six years from the date of the judgement. If a tenant has paid after one month of a CCJ being issued then the report will read as satisfied, if the tenant still has a CCJ in progress then the report will read as unsatisfied. If a tenant has an unsatisfied judgement on their record then they owe a creditor money and you may questions whether this tenant is reliable.
Any Bankruptcies and insolvencies will be present on a tenant credit report. If a tenant has been declared bankrupt in the past this will stay on their report for a minimum of six years and sometimes even longer if the bankruptcy exceeds six years. This affects a tenant applying for credit, as they legally have to tell any lender that they are bankrupt.
In terms of completing tenant screening and renting a tenant your property all this information should come together to form a financial history. If a tenant is not on the electoral register, has numerous CCJs unsatisfied and was declared bankrupt in the past, it worth your while thinking about whether this tenant is right for your property. On the other hand if you have a tenant with nothing outstanding and with no undisclosed address you can feel confident in making an informed decision. Getting Past landlord and employers references is a great way to double check a tenant and get actual opinions from people they have dealt with.
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