Please advice on "referencing* for renting

BookwormPrincess

Hi all,

Our situation in a nutshell:

House is on the market to pay off debt & move closer to children's school

Enough equity to offer lump sum IVA, alternative is bankruptcy

Managed debt well for many years while we both earned reasonable salaries, had high credit score, low risk to lenders

Chronic illness struck so I couldn't go back to work after 2nd child & husband had to take part-time lower paid job to help care for me and kids

This led to starting a DMP 18 months ago with charity CAP (Christians Against Poverty)

We have found a rental property and are 1st in the queue to view it on Wed. We are filling in the application forms ahead of viewing.
However Letting Agent has implied that our DMP may mean that we fail referencing. She found out from LET ALLIANCE that we would need an Experian Score of over 545. We have obtained our free trial from Experian and have a score of 582.

We are still very anxious that we may only just "scrape a pass" and therefore the landlord consider us a high risk because of our low credit score.

Despite DMP, the positives in our favour are that we have lived entirely within our means for 18months and not taken out new credit or used overdrafts. Our mortgage has not had a default in the 8 years we've had it - while we made a claim on our MPI last year the mortgage had two partial payments against it during the wait but a arrangement was agreed with the mortgage company. Those two months came up as a (1) and (2) on the credit file, however the status appears as "up to date" with no defaults on mortgage.

We have a UK homeowner Guarantor lined up and will receive housing benefit.

Questions:
- Is there anything we could do to improve our chances?

- Would the landlord be able to see our full credit file and all details of our debt?

- While we apply for tenancy and referencing, would other prospective tenants be able to view the property and then make applications at the same time? [i.e. does the landlord get presented with multiple choices for tenants at the same time?]

- Does anyone know if LET ALLIANCE will give the landlord/agent a traffic light system for tenancy risk? If so would our low credit score flag up a warning sign (we do NOT have CCJS or IVAs etc)

- The agent implied that the landlord may be inclined to refuse us and choose someone with better credit scores as there are 14 other people waiting to view the property in the queue behind us? Is that how it works? We are renting newbies if you hadn't already guessed (the guide on this site has been very helpful)!

Thanks in advance for any help or advice you can offer, especially from a landlord's or letting agent's point of view.

anselld

The LL/LA cannot see most of the detail of the credit file which you can see, only CCJs, IVAS, Bankruptcies, etc, etc. The credit score is also meaningless.
However, you have disclosed the full picture to the LA, so if there is strong demand for the property they may well choose someone else who they consider more likely to be able to pay. Being first in the queue is no guarantee against this unfortunately.

G_M

Yes, most LLs will review all serious appliants - it's not usually a queueing system, more like a job interview where all applicants are reviewed and the best candidate selected for the job.

I suppose there might be a few LLs who take a different approach.....

Offering a guarantor can help.

So can offering 6 months rent upfront (with some LLs).

BookwormPrincess

Thank you for your answers. Very helpful.

This LA had information from Let Alliance (a referencing service) that the credit score over 545 was relevant, in that it indicated a pass or fail. I took this to mean it indicated whether the reference would be a red light (warning) or a green light (go ahead). Anyway, we'll find out more next week.

The analogy of a job interview is very useful, thank you. That would explain why the LA said the landlord might choose someone else, although if that is the case I am not sure why she implied being first to view was relevant.

We will be offering a guarantor as well, I can only hope this landlord wants to give a family with young children a chance.

If we'd sold the house already I would offer 6 month's rent upfront, but unfortunately that wouldn't be possible until after the house sale completed.

It's good to know that the LA/LL can't see full credit file. We were advised by the referencing service to be upfront with the LA about the DMP, everything else I have read has said honesty is the best policy. However, I'm starting to wish we had kept that to ourselves. It's so hard to know the best way forward. Can't 'unreveal' those facts now, sadly. And at the end of the day the DMP has no bearing on our ability to afford rent, since mortgage/rent is always a priority.

Trouble is, the application form asks if we have any adverse credit, and I assumed a DMP with defaults on some debt or missed payments etc (as that is what paying lower than the min payment has come up as on our experian file) is adverse credit, so I felt I had to say yes.
Does anyone know what the definition of adverse credit actually is so that in future I can answer the question more accurately?
Perhaps I've said yes, when I needn't have.

Sadly, it seems declaring this DMP may have scuppered our chances :-(

HappyMJ

Adverse credit is at it's worst unpaid CCJ's, recent bankruptcy, several defaults on your credit agreements. However, with time you can show you are keeping up with your payments or have come to an arrangement with your creditors.

Single one off missed/late payments usually are ignored as they don't proceed to default unless there are 3 missed/late payments in a row.

If your on a DMP it's highly likely you have adverse credit so no point paying for a credit check if they don't want anyone who has had to default to be able to pay the bills....although most people know rent comes first before any unsecured credit card payment so with an explanation, a guarantor, 6 months rent upfront they can ignore all that.

Personally I wouldn't mention housing benefit if your salary/wages can support the rent without it. If once you move in you find you can claim a small payment of housing benefit then that's nothing to do with the landlord. Landlord's don't typically want tenants on full housing benefit but partial HB is OK.

BookwormPrincess

Thank you HappyMJ, I really appreciate these answers.

From you answer it seems I was right to answer yes to adverse credit, although our mortgage account does not have an adverse history.

I think a full explanation of our situation is how we will play this. We have a a guarantor, we could perhaps offer a promise of 6 months rent in advance from the point when our house sells(?) and just see what the landlord decides.

The housing benefit is a tricky one because in the rightmove description they have stipulated:
"PETS AT LANDLORDS DISCRETION. NO SMOKERS. LANDLORD MAY CONSIDER BENEFITS WITH A UK HOMEOWNER GUARANTOR."
Many listings will say "NO BENEFITS". This landlord seems more open to the idea.

Our income might not be adequate without that housing benefit but we do not know the exact amount we would get. Somehow I thought the fact our income would increase with housing benefit would have been a positive factor?

I am worn out trying to second guess everything! Given that my health is not good (hence not working) all this stress is making my illness worse.
Oh how I hate debt! Hindsight is such a wonderful thing. I will be teaching my children that the good old fashioned approach of saving for what you need is the best policy. Save, save, save! Don't borrow. A lesson learnt too late to help us now :-(

HappyMJ

Problem is housing benefit is not guaranteed. They (council) could say you used your proceeds from the sale of the house to intentionally pay off an unsecured debt to reduce your capital and you get nothing in housing benefit. It's called deprivation of capital....so just best not to mention anything to do with housing benefit. They could also say you paid 6 months upfront on purpose to get housing benefit and aren't entitled to housing benefit as it may also be considered capital.

So...just try and get the tenancy based on your actual income now and not things you may claim after you move in.

Some borrowing is good. Mortgages to buy a home and loans to get a method of transport to get to/from work to earn money to pay off the loan are both good. Loans for holidays....I've never understood why people take them out.

BookwormPrincess

HappyMJ wrote: »

Some borrowing is good. Mortgages to buy a home and loans to get a method of transport to get to/from work to earn money to pay off the loan are both good. Loans for holidays....I've never understood why people take them out.

You are absolutely right here, not all debt is bad. We have only ever once used credit to pay for a holiday, which was 10 years ago when we went on honeymoon, and we had a plan to repay it because we were both working full-time. But even now with hindsight, I wouldn't recommend people do that. It's the attitude that "we will always be in this situation so can afford to repay the debt" that has recently got us into difficulty. No one predicts illness blind-siding them, although that's what some insurance cover is for I guess. Not that we are covered!!

Thank you, that information about housing benefit is helpful. I need to look into what you have said about "deprivation of capital". Our intention is to use the capital we will get from our house to offer a lump sum IVA to our creditors. If we are not allowed to do this because we wouldn't then qualify for housing benefit, then we may as well use all the capital to pay our rent. I never even considered that sorting out debt would cause a problem for housing benefit, so thank you for highlighting that. I think I need to consult our debt management company and ask their expert advice about this. Do you happen to know what level of capital (through sale of your house) is discounted for housing benefit? It's always amazed me that people are allowed up to 16k in savings and still get benefits. Every time I've been asked about level of savings I think "if I had that amount of money in savings I wouldn't need to ask for help!".

BookwormPrincess

HappyMJ wrote: »

So...just try and get the tenancy based on your actual income now and not things you may claim after you move in.

Actually, I have checked the figures and based on an affordability assesment criteria that the credit referencing service (LetAlliance) use we can afford the rent on paper without housing benefit.

LetAlliance count certain benefits as income and not including the future claim for housing benefit our annual income is higher than the required formula of [monthly rent x 30]. Plus with a Guarantor (needed because I am unemployed due to disability/illness) who will have a salary higher than the [monthly rent x 36] we meet all the affordability requirements. Thankfully this 2 bedroomed rental is reasonable priced close to the LHA amounts.

Gosh :eek:, this is all so complicated but hopefully all this preparation will pay off in the future, even if this rental slips through our fingers.

BookwormPrincess

Thanks again to those who replied, your advice has been very helpful.

We viewed the property today - it leaves a lot to be desired, but nothing a good clean and a new coat of paint wouldn't sort. The location is great for my children's school and rentals in that area are quite rare (2 over the last 18 months!).

The Landlady has chosen to process our application, which means we will be put through for referencing. We were upfront about the DMP but didn't make a big deal of it. We mentioned Housing Benefit but our income affordability didn't depend on it. We also offered the promise of paying 6 months' rent in advance upon completion of our house sale.

Now we just wait and see whether the referencing final report is favourable, but everything LetAlliance have said tells us that a DMP isn't a problem, it's CCJs, IVAs and Bankruptcy that they are concerned about. So we'll see ... may take up to 10 days!

dapast

I was in an iva till recently, we also rented, when moving we found it a lot easier to look in local papers and find private let's, this way you usually get to meet the land lord from the start and can explain your situation fully, most are understanding, as long as you have a solid reference, employer especially, it should be ok.

LA's usually have a set of tick boxes you have to fill to get in and with an iva we struggled, something to do with the agents insurance against non payment of rent or something.