Credit Checks, Credit Report Files and Credit Scores

Anyone applying for a credit card, a loan, or a tenancy on a property these days, will most likely be asked by the lender, the agent or a landlord to have at least a basic credit check carried out before the application is accepted.

The idea is to verify that the individual applicant is a trustworthy person who is likely to pay bills or rent on time.

In addition to the basic credit check, most tenant applicants are asked to provide references: usually one from their previous landlord or letting agent and one from their current employer. The landlord or agent can carry out the referencing for themselves, or they can do a Comprehensive Check with TenantVERIFY® which includes referencing.

The previous landlord will be asked to verify if the tenant left the property in a good state, paid their rent on time and would the landlord rent to them again? The employer will be asked if there are any future plans for a change in employment status and to verify the stated time in employment, position and earnings.

Credit Check Report

The credit report file (or credit history file) on an individual begins on the day he or she first opens a bank or building society account. It records every loan and credit card she applied for, every late payment made, every loan she is still paying off, and every credit check carried out on her.

Most of the information on an individual’s credit history report, therefore, comes from the companies that have been dealt with on credit, such as banks, credit card and finance companies.

But, the file also contains publicly available information such as the applicant’s address, how long in residence, and any county court judgments (CCJs) or bankruptcies.

Individuals have every right to check their credit files. If it is believed that information obtained for a credit check is incorrect, individuals may file a statement explaining why.

There is no obligation on the landlord who carries out a check to divulge the details obtained, in fact they will be advised not to do so by the credit reference agency, but they should be willing to give the main reason for rejection – e.g., a low credit score.

Inaccurate information can be removed from an individual’s credit file, so whether you are a tenant or a landlord; it’s well worth checking your own file from time to time, but nobody can have accurate information removed from a record.

Credit Scoring

In this part of the credit check process. The applicant completes an in depth application form which also seeks permission to carry out the checks. The form asks for personal history details about such things as employment status, address, current bank accounts and credit cards, current income, previous landlords etc.

The credit reference agency will give the landlord or his agent a score based on the answers and the details on the applicant’s credit report file. The information obtained is referenced to a pre-determined points system, giving marks for each answer. If the score is above the minimum limit set by the system, then the applicant qualifies for the loan or the tenancy.

Of the three main credit reference agencies, all use slightly different scoring systems and all will use their own rating credit rating criteria to arrive at a particular score, however, most systems are based on a range of scores from around 300 (bad) to 900 (good) These represent the extremes.

Our scores range from:
  • Accept – Good Score – 631 – 750
  • Caution – Accept with qualifications – 551 – 630
  • Decline – Score indicates a high risk – 500 – 550
What is a FICO Score?

FICO is the acronym for Fair Isaac Corporation, a publicly-traded corporation in the U.S which developed a method of credit scoring now widely used and recognised among the main credit reporting agencies (Equifax, Experian etc) as a FICO score.

Can Individuals with a Poor Credit Score get Loans and Tenancies?

There’s no guarantee, but the answer is sometimes yes!

Unfortunately, due to the statistically increased risk lenders will often ask for a higher rates of interest on the loan.

In the case of a tenancy, the landlord or his agent may request a guarantor – someone (usually an employed householder) to guarantee to pay the rent and other obligations under the tenancy if the applicant fails to pay. In the case of a guarantor, they must also be willing to undergo a credit check and referencing and sign a guarantor agreement.

If as an individual you have had credit problems you should always be totally open and honest about it, otherwise untruths in your statements will definitely go against you.

Note: never rely totally on these standard answers. Before taking action or not, always seek professional advice with the full facts of the case and all documents to hand.

Some Useful Documents

See our User Guide here

Our Advice on Tenant Screening, a 20 point Checklist here

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