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Preparing for reference checks
Once the terms of an offer are agreed, the tenancy will be subject to successful referencing.
There are generally two approaches to referencing, either the agent collects and checks the references themselves or as is more often the case, the referencing process is handed over to a separate company to process.
You will need to give your consent to your information being shared and checked and if this has not been done already, there will be a sign-up process to the referencing company. Nothing will be able to be done with your application until you have completed this consent.
You will need to supply your personal details, employer and previous landlord information and there will also be a credit score to check if you have any adverse payment history.
To successfully pass referencing you will firstly need to meet the affordability criteria set. The calculation is normally that your monthly gross salary needs to be at least 2.5 times the monthly rent or thinking about it another way, your gross annual salary would need to be at 30 times the monthly rent.
If there are going to be multiple people named on the tenancy, the calculation would apply as a group. If you are splitting the rent into unequal portions, the referencing company will usually consider the affordability of each of your individual shares separately.
As well as checking the affordability and checking your credit score (which will leave a record on your credit score) they will contact your employer to confirm your employment details and salary. If you are currently in a probation period, you need to disclose this upfront as it is one of the questions that will be asked of your employer. Your previous landlord will also be contacted to confirm that rent payments have been up to date and the previous property kept in good order.
It is important to be transparent about what has happened in the past as part of the checking process will be to validate the information that you have supplied. If you fail to disclose something important and this is subsequently flagged up, it will count against your application and increase the risk of you failing the referencing process.
If you have had financial problems in the past or are unable to provide adequate or acceptable references, another option that some landlords and agent will consider is taking more rent up front.
If the landlord operates a manual referencing process they will ask you to supply individually written references from your employer, bank and previous landlord and also want copies of bank statements, all of which can take some time to gather. As part of your search process, it is helpful to gather all of the information for referencing to hand so that your application can be processed swiftly.
There are normally three outcomes to referencing: PASS, PASS WITH CONDITIONS and FAIL. Conditional passes will need a guarantor to be in place to support any application and cover any outstanding payments should you default on the rent.
The guarantor will also need to successfully pass a similar referencing process. Multiple tenants are jointly responsible for properties so in the case of a problem the landlord could look to one or all of the tenants to make payment. The same can apply to guarantors and so you should clarify which specific costs the guarantor may be required to cover.