Referencing can be a stressful and frustrating time but it need not be. By working with me and knowing some of the criteria outlined below referencing can be completed quickly and painlessly.
On average it takes 5 working days to complete referencing. The sticking point is often lack of communication between parties including employer, current/ex landlord for referencing and your gurantor (if required).
Just making sure the correct information is given to all parties and you ask them to look out for and provide required information can simplify and speed up the process no end.
So what is it that is looked for during referencing:
Each Tenant will need to be referenced and the full rental amount covered by all applicants. Even if one person is covering the full amount of rent for any reason, please do not be surprised if all adults (aged 18 or over) are referenced as this is still best practice.
Self employed applicants who have been self employed for less than 12 months will need to provide a gurantor, provide proof of savings or make a up-front rent payment to cover any shortfall in referencing. If self employed for more than 12 months one of the following will suffice:
* 6 Months full personal bank statements
* Open banking check
* Most recent tax return/SA302
* Reference from accountant confirming the previous financial years income
Students will most likely require a guarantor unless they can show satisfactory income and/or savings.
Pensioners and retired individuals will need to show evidence of their pension’s in the form of their annual pension statements, award letter or 3 months of bank statements. A P60 can also be accepted as proof of income.
Adverse credit can be a sticking point but need not stop a successful reference. A credit check is completed and is used as a primary indication of how applicants manage their money. Credit scores are rated as Excellent, Very Good, Good, Poor and Very Poor.
Applicants with a Poor or Very Poor rating will require a guarantor. Please not a guarantor with an adverse credit history will be declined.
If you can a CCJ, IVA or been declared bankrupt the following applies:
Rules for County Court Judgment
Satisfied CCJ’s outcome will be accept with guarantor
Unsatisfied CCJ under £5,000 outcome will be accept with guarantor
Unsatisfied CCJ over £5,001 outcome will be decline
More than 2 unsatisfied CCJs of any amount will be declined
Rules for bankruptcy and IVA
If an applicant has a bankruptcy or IVA the following rules will apply:
Bankruptcy dated in the last 12 months will be declined
Discharged Bankruptcy dated over 12 months ago will be accept with guarantor
IVA will be returned as accept with guarantor
Affordability check are important to access the level of affordability for the applicants and ensure they can pay the rental amount stated.
When reviewing the affordability we have taken into account information supplied by an employer, accountant or when necessary bank statements.
Tenant income is calculated at 2.5X the monthly rent
Guarantors Income is calculated at 3X the monthly rent
So this means if the rent is £1,000pcm the tenant or tenants must be earning £2,500 (£1000 x 2.5) per month. If a guarantor were required for this property they would need to earn £3,000 (£1000 x 3) per month in total. It is possible to have two guarantors if required.
The key to successful referencing therefore is knowing the basics and working with your letting agent and the chosen referencing partner. Both are here to help you to successfully pass referencing and so all the information they ask for is essential to that end.
I hope this helps and I wish you success in your home hunting.