Why won’t my letting agent tell me why I failed referencing?

Failed references may be more common than you think, and in many scenarios, the letting agent and even the referencing agent themselves are unable to disclose the reasons behind the ‘fail’ which is frustrating for the letting and referencing agent, not to mention for the applicant. This may seem very confusing and often, applicants are left feeling rejected for no good reason. In this article we address some of the potential unexplained reasons why references may have failed and some of the reasons, why landlords, referencing and letting agents are restricted as to what information they feedback to you – and in some cases they don’t have access to this detail themselves!

Reason 1 – Affordability

Generally referencing agencies require your household earnings to be at least x30 of the annual rent in order to determine whether an applicant can afford the rent. This is to ensure that renters are not over-stretched every month, avoiding any debt or strain further down the line which can result in an uncomfortable situation for both the landlord and tenant.

In some cases, applicants may meet the affordability criteria based off income, however, as part of the referencing process, often additional checks may be carried out. This might include open banking or credit score checking, using third party companies such as Experian or Clear Score, which will take in to account the volume of monthly outgoings an applicant has. Just a like a mortgage, if someone’s monthly bills/existing loans are excessive, this will have a detrimental affect to the overall affordability score.

Reason 2 – CCJs/ adverse credit/ defaults on credit commitments

If someone has a satisfied CCJ below £300, this is generally acceptable. If someone has a satisfied CCJ between £300-£5,000 then this would not be acceptable, however it would be acceptable if a guarantor was in place (and of course the guarantor meets with all criteria also!). Generally, most BTR providers and landlords will not accept someone with multiple CCJs, any unsatisfied CCJs or satisfied CCJ’s over £5,000.

Often, as this sort of information is provided by 3^rd party companies, the landlord or referencing agency is unlikely to be able to pass on specific information (or are otherwise not privy to this information themselves). An applicant can request the details of the credit scoring company and they are able to contact them directly to obtain their credit scores themselves.

As well as CCJ’s, other adverse information such as IVA’s, bankruptcy orders or Trust Deeds (in Scotland) could lead to a referencing application being declined. The referencing agency can also see information relating to  credit commitments and whether you have been meeting your obligations relating to these. If an applicant has defaulted on any of these, this could also affect the outcome of their application.

Reason 3 – References

Just like a job application, references are a key part of the application process. These usually consist of both current landlord references and employment references. If either of these are returned negatively, then this could result in a failed referencing result. It is important to note that as this is information provided by others, it is not information that can be passed on to the applicant.

If a reference is taken relating to a current tenancy and it is advised that the tenant has failed to pay their rent or conduct the tenancy in a satisfactory manner, this is likely to lead to a declined result.

For employment references, job security and confirmation of sufficient income is obtained to ensure that the applicant is able to meet  obligations relating to credit commitments, housing expenditure and the rent.

Reason 4 – Fraudulent Documentation

Applicant falsifying bank statements, identification and payslips are far more common that you would expect. Documents are checked to determine if they are genuine and if they’re not, this will result in an automatic fail. Often this as a reason for a failed application, will not be shared with the applicant as this is ultimately a crime and therefore a police matter – a referencing company declaring this reason to an applicant would be classified as tipping off. Any applications which are fraudulent are to be reported to the national fraud database.

Reason 5 – Guarantors and Joint Applicants

If for any reason, a guarantor is required, they too need to adhere to all of the referencing criteria mentioned above. If they do not meet some of the criteria, this would also result in a failed reference. As the reasons involve someone else’s personal data, detail for this sort of failed reference cannot always be shared with the main applicant. Similarly, if someone is applying with a friend or family member, both applicants need to meet the affordability criteria.

Reason 6 – Landlord Discretion

Remember renters are looking to rent someone else’s property and whilst  a landlord cannot discriminate inappropriately for any reason, they do have the right to reject an applicant if there are any concerns over antisocial behaviour early on – whether that’s due to abusive/irate language and behaviour toward members of staff or welfare concerns between applicants. Landlords have a duty of care over their staff (or themselves if they are an individual landlord), all their customers and neighbouring residents.

Above all else, we recommend that applicants are upfront and honest with all information from initial affordability criteria discussions – this avoids a holding deposit being taken for a property and referencing being undertaken if there is known information which will inevitably result in a failed reference and also avoids the risk of any holding deposit money being retained.