How important is a good credit score when renting?

There are several factors that landlords consider before signing the tenancy agreement. The tenants usually must have a solid rental history, sufficient income, a positive criminal record, references and sometimes more, but one of the most important is a good credit score.

So, if you’re searching for a property to rent (apartment or house), you can be sure your credit score will play a huge role in representing what kind of tenant are you.  

In this article, we’ll explain why having a good credit score is important and how to improve it.

Why do landlords check the tenants?

We have to understand Landlords, nobody wants to rent their property to unreliable people. Therefore, landlords want to make sure the tenant will be able to fulfil their duties and look after their property. That's why property owners ask property agents to carry out credit score checks to determine if the tenants are responsible and can pay the rent and other bills on time.

How is a credit score measured?

There is no one-size-fits-all mathematical procedure to measure the credit score, but there are a few things credit record companies base their scores on, including:

Payment history

The first thing that impacts your credit score is your payment history. If your payment history shows that you do not pay your bills and other payments (instalments) on time, it will negatively impact your credit score. Typically, this accounts for about 35% of your credit score.

Outstanding debts

The amount you owe in the form of loans and credit makes up about 30% of your credit score. The total amount you are allowed to borrow also affects your score. If for example, your credit balances are high and maxed out, it will automatically reflect a lower score. If your available amount is high, but you can control your spending and maintain a low borrowing rate, it will affect your score positively.

Higher credit limits essentially mean that lenders trust you with their money, but to get a boost in your credit score, you have to prove that you can maintain firm financial control and management.

The credit history

The credit history accounts for about 15% of your end credit score. If your credit history is almost non-existent, you might display that you don’t know how to use and manage credit. Longer credit history acts as a credible track record of responsibly or irresponsibly managing credit over a certain period of time.

Account types

Generally, there are two types of accounts, revolving credit accounts and instalment credit accounts. As the name suggests, a revolving credit account allows you to use or spend money up to a specific limit (credit cards). On the other hand, with an instalment credit account, you must pay the loan in regular instalments (mortgage and car loans).

So, having both types of accounts can impact your credit score positively. It usually amounts to about 10% of the credit score.

How to find out your credit score?

You can check your credit scores via various credit checkers online, such as ExperianEquifax, and TransUnion. These three are quite common amongst landlords and lenders therefore, more often than not, that's where they will review your scores.

There are also other credit scoring sites and third-party services like checkmyfile and FICO, but these are less common.

What’s the acceptable credit score?

The credit score requirements in the UK vary based on the location or area you want to rent a house or apartment. For example, the score rating requirements for prime locations will often be higher; on the contrary, the score floor will be lower in less popular areas. That's why it's challenging to decide on a single figure.

Let's consider the average credit score to rent a property nationwide in a well-reputable area. We can estimate the desirable credit score should be at least above 650, preferably somewhere between 730-740 depending on the area.

What to do if you have a poor credit score?

It's worth noting that a bad score does not mean you cannot rent a flat or a house. However, in case of poor scores, you must choose other options to boost your credibility and gain the landlord's confidence, eventually a signature on the tenancy agreement. A few available options are:

  • Offer to pay three to four months' rent in advance. It will allow the landlord some breathing space and reassure him that you will be able to keep up with the payments.
  • Involve a guarantor (with a good credit score) who would be responsible if you don’t pay the rent on time.
  • Ask for references from your previous landlords, as they can give the best feedback about having you as a tenant.
  • Give your new landlord proof of your earnings. Providing payslips or bank statements can leave a positive impression and present you as a trustworthy and honest tenant.

How to improve your score?

A credit score is not a stagnant, once-in-a-lifetime number, it constantly fluctuates and changes. Your financial decisions will influence if your credit score improves or impairs. Therefore, a bad credit score doesn't necessarily mean you cannot improve. Here are a few things you can do to boost your credit score.

  • Do not keep any outstanding payments for full periods of credit; pay them faster than the last instalment date.
  • Ensure regular payments on time.
  • Keep a long, clean credit and payment history.
  • Do not change your location frequently.
  • Paying online, via direct debit will help you boost your score.
  • Do not rely on credit too much. Make sure you use it, but don’t overuse it.
  • Have different types of credit accounts with credit history (no idle accounts)

Thinking of Moving to St Albans?

If you’re looking to rent a property in St Albans, get in touch with our expert team today. We have over 30 years of experience, helping tenants across St Albans and surrounding areas to find their ideal home. Contact our friendly team today at 01727 836561, or browse our available properties in St Albans; properties in London Colney; properties in Sandridge online.