As a fellow landlord, I am reaching out to gain insights into the interpretation of Equifax risk scores and their influence on the rental decision-making process.
Currently, I am in the process of letting a property, and both prospective tenants, who are in a relationship, have successfully completed comprehensive referencing. Their combined monthly net income stands at three times the monthly rental income, and neither tenant has any adverse credit history.
However, upon reviewing their Equifax risk scores, I have noticed some discrepancies. The lead tenant, who earns twice as much as their partner, has been assigned a score of 26, classifying them as high risk. Conversely, the other tenant scores 176, indicating a moderate to high-risk level. Here is a description of the risk score.
I would greatly appreciate your perspective on how such scores should be interpreted and whether they should significantly influence the rental decision-making process.
I take any credit “scores” with a pinch of salt. I use credit checks purely for looking up CCJS and adverse credit and rely on manual assessment of bank statements and job security/history and character assessment as the real indicators.
A score that low presumably means he has a lot of debt. I wouldnt base any decision purely on the score but given score further investigations are probably necessary, bank statements are useful but some people will have multiple bank accounts so may not accurately show financial commitments. You could ask prospective tenant if given the score they are willing to show you their credit report to help secure the tenancy so you are then able to determine affordability based on debts.
I’ve spoken to the tenant and they said they have two loans, one of them has a missed payment and a credit card that has “high credit utilisation”, I think that’s a euphemism for maxed out!
I have asked for the credit report so we’ll see.
So, my question now would be, how were you not aware of the loans? Did you not request 6 months of bank statements and go over them carefully? That process should have revealed the loan payments and, having spotted them, you would have been able to question the applicant. Alternatively, if you did look over the bank statements and the loan payments were not from the account the applicant provided details of, there are further questions as to why not all bank accounts were provided.
Finally, it’s worth asking applicants up front, before a credit check if a) you’ll find any CCJs and b) if they have any outstanding loans or failed payments from past loans that will affect credit score. They can deny both, but if you then find something, you can discount them on the basis that they tried to hide something from you.
I realised that I neglected to request bank statements, which I should have done. Do you typically require bank statements as part of your standard procedure, regardless of the credit check outcome? For instance, even if an applicant has an excellent risk score, do you still review their bank statements? I’m interested in learning more about your approach to vetting new tenants. How do you handle situations where a prospective tenant is reluctant to provide bank statements or a credit file upon request?
I will always request bank statements regardless. Some landlords request 12 months, I tend to ask for 6.
I have only ever had one complain but they were clearly trouble from the offset.
All others have had no issue and provided them willingly. I think more tenants are understanding of market conditions now and how competitive it is. Some tenants on here have shown reluctance but it’s probably those who are bending the truth.
I have in the past felt a bit awkward asking sometimes but now it’s run of the mill.
You need to see a prospective tenants outgoings in order to assess affordability. A big salary may also be matched by a big outgoing spend such as car finance,credit card debt and other lifestyle habits that don’t leave enough money for rent. Bank statements should show those income and outgoings.
Regaining possession of your property can be costly and stressful, don’t take any chances.
I require bank statements along with application form as part of my standard procedure. I then go over them very carefully, and if I have any doubts at this point, it saves me the cost of referencing. I only reference applicants who I believe have almost certainly got the tenancy i.e. referencing is the very last thing I do before I offer it to them.
Wow i’m really shocked at such low credit scores!! My initial thought was they must not have had much experience of credit but you have already qualified this. This must mean they are highly indebted and possibly pay late regularly. I know some have said not to take too much note of the equifax score, but you should be able to compare it against your own to assess what this means. For example my score is only a little below 500 so the scores you have mentioned are extremely shocking! I’ve never seen single digit scores!
Conversely, my score which is close to 500 would suggest i’m highly likely to pay debts off and in time. This would be true as i take great care to have a clean credit file, however what the score doesn’t tell you is that i have three repayment mortgages which leave me with very little disposable income at the end of the month!
This is precisely why I ask for bank statements before I do a credit check. The credit check score is virtually useless without a clear understanding of how the applicant manages money and what their cashflow is like.
Let’s also not forget that not having any credit cards or mortgage, not being on the electoral roll or returning from overseas can also have an adverse affect on a credit score because it effectively provides no data on how someone handles credit. For example, I haven’t had a mortgage since about 2002 so Experian considers me a moderate risk under “mortgage details” because they have no evidence of me managing a mortgage.
How is it possible? Share your secret to success… Mine’s in the 700s and I thought I was doing well!