Your credit score plays an important part in renting your ideal property. It is a key factor to look at before deciding which potential tenants to move in, and which applications are rejected.
In this blog, we’ll explain what a landlord looks for in terms of your credit score, and how that impacts your chances of getting the keys to your next rental property.
A credit score is more than just a number; it’s a reflection of your financial history and reliability. A high credit score signifies you have a strong borrowing track record, which translates into instant credibility and trust.
If you have little credit history then you need to prove your finances in other ways, such as providing proof of a steady jo and paying the full term upfront.
It’s worth noting if you have a record of defaulting or not paying debts, then that might force a landlord to see you as a risk. A landlord will then size up your credit history and use that to make an informed decision.
While there isn’t a fixed minimum credit score requirement for renting, a score above 620 is, generally, considered favourable. However, it’s important to note: that different landlords and letting agencies may have varying criteria. Most professional referencing companies tend to show the results simply as good, fair or poor.
Credit Rating Agencies (ERA) do have different scoring numbers. Let’s take a look at the UK’s largest top 3 CRAs and see how they vary.
| Credit Score | Experian | TransUnion | Equifax |
| Fair | 721-880 | 566-603 | 380-419 |
| Good | 881-960 | 604-627 | 420-465 |
| Excellent | 961-999 | 628-710 | 466-700 |
Experian is the biggest UK CRA. Their credit scores vary from 0-999. TransUnion, formerly known as Callcredit, is the second biggest UK CRA, and their scores vary from 0-710. Equifax credit scores vary from 0-700. These scales are why the above numbers drastically vary. It’s good to understand this, especially if you are someone who checks and tracks your credit score.
Payment history holds paramount significance. It is a record of your debt repayment behaviour spanning a specific period of time. It serves as a yardstick for assessing the risk of lending money to you. Demonstrating a commendable ability to adhere to repayment terms outlined in your agreement with the lender means the better your credit score is.
While the outstanding balances on personal loans, student loans, or credit cards contribute, your present credit utilisation rate carries even more weight.
Credit utilisation rate quantifies the proportion of your overall available credit currently in use. For instance, if your credit card boasts a £1,000 limit and you’ve spent £500 within a month, you’ve utilised 50% of the available £1,000. This translates to a credit utilisation ratio of 50%. Most CRAs recommend aiming for a credit utilisation rate of around 30% as a conservative and smart approach. Exceeding 75% is likely to raise warning signs to landlords looking at your finances.
Your credit history length refers to the length or age of the accounts appearing on your credit reports. The longer you’ve had an account while exhibiting responsible usage (no outstanding debts, bills and/or loans), the more positive impact it has on your credit score.
Engaging in numerous, new credit applications or recently opening several accounts might lead credit agencies to perceive you as a problem. Nevertheless, remember that exploring your options is valuable. CRAs do recognise that consumer behaviour includes shopping around, and this should not invariably be interpreted negatively. But, if you suddenly start applying for many credit cards then this could be a red flag and lower your credit score.
Having a credit mix influences your score. For example, if you are managing with ease loans, credit cards, retail store cards, etc… it will likely raise your credit score. But, do not misinterpret this. It does not mean you should suddenly go out and apply for loans and other types of credit, just to show you have a variety of credit. Do not take a loan out solely for this purpose, unless you are confident you can pay the loan back in time.
The other obstacle that can stand in your way and lower your credit score is renting with a County Court Judgement (CCJ).
A County Court Judgment (CCJ) harms your credit score and can make renting difficult. With that said, some landlords may still consider your application depending on whether you can pay rent in advance, have a guarantor, and demonstrate improved financial management on your part since the judgment.
Transparency is key, so it’s advisable to inform potential landlords about your situation and provide context.
If you fail a tenant reference check, it could put a stop to your application process. To mitigate this, work on improving your credit score, addressing outstanding debts, and maintaining a positive payment history. The estate agent will also obtain references from previous landlords or employers to showcase your responsible behaviour.
By understanding the significance of a good credit score, you empower yourself to take charge of your financial health and enhance your creditworthiness. Remember, a strong credit score isn’t just a number; it’s a testament to your reliability, responsibility, and readiness to embark on a successful tenancy journey.
We are not only here to help you find your dream property, but, also to help you navigate through rental properties and their requirements.
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