Credit check for housing

squeeks

Why do letting agents and landlords insist on credit checks?

You aren't getting a credit product as far as I can tell.

You don't need a credit check to rent a hotel room or to hire a car. Admittedly you need a credit card but why do you need a credit check to rent a house?

With the minimum length of the letting terms being 6 - 12 months, you can have a perfect credit rating going into the contract and quite conceivable go bankrupt during the tenancy. So I don't think it actually gives you any benefit.

Is it just an excuse to charge tenants more and potentially give the landlord an idea of how much they can increase the rent by?

dimbo61

You have hotel/reception staff at a hotel and most now ask for a credit card to book your room.
With car hire most if not all car hire companies ask for a credit card as security ( What does a car cost £8000 to £20,000)
Now a landlord is giving you the keys and exclusive use of his/her rental property which cost Say £100,000 to £500,000.
Many BTL lenders require you to do a credit check on tenants before renting to them.
A tiny number of tenants wreck a rental property or turn it into a Cannabis factory!!!
If a tenant is already bankrupt it is no good taking someone to court if they do not pay the rent for 6/9 months.
A good landlord would also ask for an employer check /reference

squeeks

As a tenant you pay a deposit, instead of handing over a credit (or debit) card which can be charged for any damages. If the damages exceed the deposit, a landlord can go to court to try and recover the rest.

Wrecking a property or running a Cannabis factory has absolutely no affect on your credit rating.

All a credit check proves is that you typically pay (or don't pay) credit agreements on time.

Rent isn't a credit agreement, so payment history doesn't appear on a credit report.

So, as a landlord only interested in managing a property and getting paid for my trouble, what information would a credit check provide me, that I need to have access to?

Tixy

A credit check by a rental agency (or for rent purposes) only currently shows public information, that is records of insolvency or CCJs. It does not show your repayment history on consumer credit agreements.

Its reasonable that a landlord wants to to know if you are in an IVA, or have been bankrupt, or if a past creditor has had to go as far as court to enforce a debt against you.

Soon a credit check for rents will start to show the history of rent payments (for landlords who choose to report that information and get permission of the tenant - by detailing it in the tenancy agreement).

squeeks

For something that only lists IVA's, CCJ's and bankruptcies (which aren't discharged) they are surprisingly expensive. I am surprised that a tenant can't provide this information themselves or that their isn't a viable cheaper alternative.

With regards to credit agencies expanding their business into the rental market. It will all end in tears.

theartfullodger

Credit checks for tenants start at about £8 - the problem may be the MASSIVE markup the agent put on that.

In Scotland such charges are illegal since 1984.

Good luck finding a sensible landlord who doesn't need such checks doing.... Don't think they'll be that many.

I pay for those checks on my tenants to protect me.

squeeks

£8 would be fine. It is the £50+ which seems to be charged which is the problem. That and insisting on everyone 18+ in the house also pays...

I'm not looking at the moment, I was just reminiscing about past experiences because of the private rented sector debate in the house of commons today.

Thrugelmir

squeeks wrote: »

I am surprised that a tenant can't provide this information themselves

You'd be surprised how deceitful the human race is.

If you ran a business, which property letting is, you'd also understand the importance of running it properly.

CKhalvashi

squeeks wrote: »

Why do letting agents and landlords insist on credit checks?

You aren't getting a credit product as far as I can tell.

You don't need a credit check to rent a hotel room or to hire a car. Admittedly you need a credit card but why do you need a credit check to rent a house?

With the minimum length of the letting terms being 6 - 12 months, you can have a perfect credit rating going into the contract and quite conceivable go bankrupt during the tenancy. So I don't think it actually gives you any benefit.

Is it just an excuse to charge tenants more and potentially give the landlord an idea of how much they can increase the rent by?

I charge my tenants a fiver, I know that many LL's charge more than that.

I'm giving someone the keys to an asset of my business, that can be worth anywhere from £60k to £250k, and feel that my assets should be looked after sufficiently.

CK

squeeks

CKhalvashi wrote: »

I charge my tenants a fiver, I know that many LL's charge more than that.

I'm giving someone the keys to an asset of my business, that can be worth anywhere from £60k to £250k, and feel that my assets should be looked after sufficiently.

CK

Most of a properties value is in the land. It is the amount of land the property sits on and where that land is which has value.

The bricks, mortar, fixtures and fittings don't actually cost that much. Hence you can buy properties in less desirable areas for less than the cost of a half decent car...

Again a credit check does nothing to prove how someone is going to live. It just shows that they have let their finances get out of hand or went to court to dispute a bill and lost, relatively recently.

A credit check may indicate that you could have issues with rent - and I'd argue that is a pretty tenuous assumption at present. Going further and making the link to how someone looks after their home seems a little daft.

squeeks

Thrugelmir wrote: »

You'd be surprised how deceitful the human race is.

If you ran a business, which property letting is, you'd also understand the importance of running it [STRIKE]properly[/STRIKE]profitably.

Sorry, the edit is a little petty but couldn't resist...

Well with reference to the tenant providing the information, I was assuming it would be in cahoots with an independent third party to independently verify, kinda like having money held by a solicitor.

The issue is you have to go through this for every agency. Some agencies like to take some of these fees when there are multiple tenants registering an interest at the same property. They then evaluate which is the preferred tenant.. But again if the fees for the service were less than £10 and paid by the landlord, it would be a complete non issue.