What is tenant referencing, and what does it involve?

Renting a property in the UK can be a challenging task, especially for tenants who have little or no knowledge of tenant referencing.

While it’s vital for landlords to perform tenant referencing to verify the credibility of their prospective tenants, it’s equally crucial for tenants to understand the process and what it involves. 

In this comprehensive guide, we’ll take a closer look at what tenant referencing actually is, what it involves, and what you need to know before renting a property.

Tenant referencing is the process through which letting agents or landlords assess and evaluate a tenant's credit history, employment status, and previous rental history to determine their eligibility to rent a property. 

Essentially, it allows a landlord to verify your credibility before offering a tenancy agreement.

The process is straightforward and helps landlords to ensure they protect their investment in the property, and, in parallel, that you can at least maintain your current expenditure and lifestyle with a new financial commitment.

So how does tenant referencing work? It consists of various checks to evaluate your reliability and ability to make rental payments.

As the UK’s largest tenant referencing, we’re always looking for ways to streamline the tenant referencing process and make life easier for tenants, landlords and letting agents. 

In 2024, we launched our advanced referencing system: VISTA. With 70% of references completed in real-time, it provides the fairest affordability assessment based on credit commitments and essential expenditures.

Here are the four steps involved in the VISTA tenant referencing process:

Scorecard

The VISTA Scorecard evaluates your financial suitability for a property based on your credit commitments, individual attributes and overall indebtedness.

The benefit of real-time assessments of these factors is that you won’t be penalised for historic debt or county court judgments (CCJs) if you’ve rectified the payments.

Identification check

Using various data sources, the VISTA ID check confirms that your identification can be matched to your address history.

Even if you live abroad at the time of referencing we can still complete the ID checks. Our expert team will simply assess your case and contact you for your identity documentation instead.

Fraud check

VISTA combines the latest AI and document forgery detection software to provide the most rigorous protection against rental fraud. This added layer of security means that you won’t have to compete with fraudsters when you’re looking for your new home.

Income and affordability assessment

VISTA verifies and cross-references your monthly income with the salary figure stated in your application.

It then assesses your credit commitments and expenditures, benchmarking these against your monthly income to determine whether you can afford to pay the rent.

This also means, based on your spending habits, VISTA will make a recommendation if you can afford a higher rental payment than a traditional assessment method might imply.

This means you could apply for more properties than initially anticipated.

While tenant referencing is not legally required in the UK, it has become a standard practice for landlords and letting agencies.

Many property owners use tenant referencing to assess the reliability and suitability of potential tenants, ensuring a smoother and more secure rental process for all parties. 

It helps them gauge factors such as credit history, rental history, and financial stability to minimise the risk of issues like non-payment of rent or property damage. While not mandatory, it’s highly common in the UK rental market.

Not performing tenant referencing can be a risk for landlords. It can lead to financial losses and legal disputes. Rent arrears, property damage, and illegal subletting are common problems from not performing referencing. 

Perhaps the biggest financial risk is rental fraud. The most common form of fraud that we encounter involves edited bank statements, primarily for income inflation, mimicking employment, or concealing illegal income sources.

Notably, 89% of failed applications in January 2024 were declined due to fraudulent bank statements.

In 2023, London, the Southeast, East of England, and Wales took the lead in fraudulent activities.

Between January and March 2024, HomeLet had already prevented landlords and letting agents from losing over £1.4m in average rent because of fraudulent applications. This builds on the £47 million we helped customers to save in 2023.

Yes! If your landlord or letting agent is among the many who entrust their tenant referencing with HomeLet, you can use our Tenant Application Tracker to check the progress of your reference. This means you can keep up to date with every step of the process.

Check out our guide to being referenced by HomeLet, which has all the information you need to make the tenant referencing process run smoothly, including a free credit report from TotallyMoney.

If you fail a reference check, it’s not the end of the world. At worst, it could lead to your rental application being rejected by the landlord or letting agency. However, that isn’t always the case.

Some other potential outcomes could be the need for a guarantor, a higher security deposit, or the need to provide additional explanations or references to address concerns. 

It's crucial to communicate openly with landlords and be aware of individual property owner policies in such situations.

Tenant referencing is a vital process that you need to understand if you’re planning to rent a property. It enables landlords to evaluate prospective tenants, verify their credibility, and make informed decisions.

As a prospective tenant, you should be prepared to undergo this process when looking for rental accommodation. 

Now that you’ve read our guide, you should be better equipped to navigate the tenant referencing process and make informed decisions.

By understanding what it entails, you should be better prepared for what’s to come and hopefully sail through the whole process. 

After all, forewarned is forearmed, as they say!

While you’re waiting for your application to be approved, have you considered Tenants Contents Insurance or Tenants Liability Insurance? Get a quote in minutes here at HomeLet to ensure you’re properly covered.