Credit check criteria

[redex]

Does anyone know what letting agents want to see when they do a credit check?
I understand that they need to know you have the ability to pay but would that not be better seen from a payslip and/or bank statement?

[Sorrel]

Does anyone know what letting agents want to see when they do a credit check?
I understand that they need to know you have the ability to pay but would that not be better seen from a payslip and/or bank statement?

A credit check involves your current financial standing and your credit/financial history, therefore a pay slip would only tell the letting agent what you currently earn and that you are employed.

[Ark]

Hi, i'm new on here but I will give you my thoughts from my wealth of time doing credit checks.

A credit check will tell you a lot about your potential customer, including CCJ's, Defaults, Active Credit accounts, and settled credit accounts as well as previous address history. All for the past 6 years. This will included dates started/ ended, court dates, default dates/ amounts and so forth. It will also show late payments meaning that someone may not have any defaults etc but numerous late payments on their active accounts therefore showing that they do not handle credit or payments well.

You may wish to look at setting parameters. IE

CCJ's/ Defaults- none in the past 12 months. Max £1000 in the past 24, 3k in the last 4 yrs etc.

If they have been satisfied (and usually it will say so on the credit file) then that shows good intention in regards to paying debts. Perhaps they had issues they could not resolve at the time but have since got into a much more stable position. A good understanding of why they occured is always important and if the person says they know nothing about it...well generally that is not the truth and they are hiding something.

Address history can also be useful in assessing how stable the potential tenant is. If they move around a lot or stay put for periods of time. Again this must be clarrified with the customer as address history can sometimes be innaccurate due to they way some companies carry out their searches. Sometimes a single address can be shown as several address's all with slight variations in spelling etc.

Payslips and bank statements do have their place however. A payslip can be used to find the average earnings. Most payslips have Year To Date figures on them (YTD) for pay, tax and NI. provided they have been in employment with that employer since the previous April you can take the YTD gross pay, deduct the YTD tax and NI and then divide by the number of months since april. This will give you an average of the customers earning for that period and help in assessing affordability.

Bank statements are a good indicator for outgoings that do not always show on the credit file such as Sky, Cable, Mobile bill amounts etc. you can look at these and what regular payments are made and if they are clearing easily. Is the customer gettings a number of returned direct debits or standing orders due to insufficient funds, are they regularly going overdrawn over their limits.

If you are planning on taking payments by standing order or direct debit this is important information in order to assess if you will actually receive your money each month and on time.

So in Summary, that is what I look for in credit searches. It may not be what everyone looks for and many will use compaies that will carry out these for them and may not receive this information but perhaps it gives you a better understanding of how each item can have it merits as well.

Rob