Tenant referencing is the process used by PropertyLoop to ensure we’re matching landlords with reliable tenants and is the last stage before a tenancy agreement is signed by both parties. PropertyLoop uses an independent third-party, Goodlord, for the tenant referencing process.
The comprehensive process checks tenants against four criteria: credit, residential history, identification, and income/affordability. Goodlord first requests information, documents, and referees for the four criteria, which are then checked and verified. Once completed, a full report is produced with a recommendation of whether the tenant should move onto the next stage or not.
Overall, the process is thorough and transparent, with a quick turnaround of 2-3 business days. To learn more about how the tenant referencing process and the four criteria work, continue reading below.
Contents:
Introduction to Tenant Referencing
1. What is checked during tenant referencing?
2. How does tenant referencing work?
3. ID requirements explained
4. Credit checks explained
5. Income and affordability explained
6. Residential history checks explained
1. What is checked during tenant referencing?
ID and Right to Rent
All potential tenants or guarantors must provide a valid ID matching the name on their application. If the name doesn’t match up, proof of name change must also be supplied.
Applicants renting in the UK must also satisfy Right to Rent requirements - immigration checks to determine if the applicant has the legal right to live in the UK.
Credit checks
Credit checks performed by Equifax to search through credit repayment history for any current or past adverse credit, and establish if an applicant or guarantor actually lives at the addresses they said they did in the past 3-6 years.
Applicants must have no adverse credit, or if they do, it must be less than £1000 and it must be satisfied. If applicants have any adverse credit, it is important they declare it beforehand on their application. Failure to declare any current or past adverse credit (active or satisfied) can lead to a failure in applicants’ references.
Income and employment
Proof of employment and income with a reference from your employer. Applicants who are about to change jobs provide the contact details of their future employer(s).
Income needs to be verified to see if applicants can realistically afford the property. The industry standard affordability ratio required is 2.5 for tenants and 3.0 for guarantors. This means that in order to meet affordability, applicants will need to demonstrate that their income is 2.5 x the annual rent (3 x the annual rent for guarantors).
Residential status
Confirming residential history of where applicants or guarantors currently live, where they lived in the past three years and their behavior as a tenant.
If applicants are not currently renting or cannot provide their landlord’s contact details, further investigation will be required.
2. How does tenant referencing work?
Step 1. After an offer is accepted, applicants receive an email to start the Goodlord referencing process.
Step 2. Applicants upload some personal information, residential history, income information, and any other relevant documents.
Note: Bank-grade security and 128-bit encryption is used to protect confidential information and keep it secure.
Step 3. The information provided is referenced and verified. Referees are contacted to verify the information.
Step 4. If there is a guarantor, they will need to provide their information and documents.
Step 5. A report(s) is produced based on the information provided with a recommendation of how suitable the applicant is for the tenancy.
Step 6. The landlord(s) will use the full report(s) to make a final and informed decision on whether or not to move forward with contact (AST).
The process is usually completed within 2-3 business days but may take longer if the information is missing.
3. ID Requirements explained
How should the ID look?
Applicants should provide a clear image of the ID.
The copy should include the whole photo page of the ID, including the MRZ code on passports and visas (see image below).
Applicants should try to avoid glare and obstructions to the image, such as fingers.
Both the front and back (where applicable) of UK Immigration visas, ID cards and permit cards should be submitted by applicants.
What are the Right to Rent requirements?
Right to Rent (RTR) legislation requires that certain types of ID be submitted when letting a property in England to prove tenants’ legal status to live in the UK.
The most common document used to satisfy RTR is a UK passport (current or expired) but a few other documents are accepted.
Landlords are also required to check this in person and keep a scan of applicants’ ID for the duration of the tenancy.
What documents are accepted to meet the Right to Rent requirements?
List A (Group 1): Any one of the documents from the list below will be accepted.
Registration certificate or document certifying permanent residence of EEA/Swiss national.
EEA/Swiss family member permanent residence card.
Biometric residence permit with unlimited leave.
Passport or travel document endorsed with unlimited leave.
UK immigration status endorsed with unlimited leave.
A certificate of naturalisation or registration as a British citizen.
List A (Group 2): Any combination of two documents from the list below will be accepted and show an unlimited right to rent.
UK Birth Certificate or adoption certificate.
Full or provisional UK driving licence.
A letter from HM prison service.
A letter from a UK Government Department or Local Authority
A letter from National Offender Management Service.
Evidence of current or previous service in the UK armed forces.
A letter from a police force confirming that certain documents have been reported or stolen.
A letter from a private rented sector access scheme.
A letter from a UK further or higher education institution.
A letter of attestation from a UK passport holder working in an acceptable profession.
List B: Documents which show a time-limited right to rent
A valid passport endorsed with a time-limited period.
Biometric immigration document with permission to stay for a time-limited period.
Non-EEA national residence card.
UK immigration status document with a time-limited endorsement from Home Office.
Other things to consider
If the name on the application does not match the details on the ID documents, applicants will be asked to provide proof of name change. Learn more about proof of name change.
Applicants’ council tax or other utility bills will not be accepted as proof of ID or Right to Rent documents.
4.Credit history checks explained
What counts as adverse credit?
County court judgments (CCJs) or Court Decrees
Bankruptcy
IVA (Individual Voluntary Arrangement)
DRO (Debt Relief Order)
What happens if an applicant has adverse credit?
The severity of any adverse credit and whether it was declared will be considered when issuing a recommendation for applicants.
It is critical that applicants declare any adverse credit ahead of time on their referencing application (active or historic); failure to do so will almost certainly lead to a recommendation that states that they are an unsatisfactory applicant.
CCJs under £1,000
If an applicant declares a CCJ under £1,000, and it is still active, they will be conditionally passed subject to paying rent upfront, not being liable for rent or securing a satisfactory guarantor.
If an applicant has paid this adverse credit off, they will also be passed outright but it will be mentioned in their report.
CCJs between £1,000 and £5,000
If this adverse credit is still active, the applicant will be recommended as an unsatisfactory applicant.
However, applicants who are upfront about this adverse credit may have it overlooked depending on the situation and upon further discussion.
If this adverse credit is satisfied, and the applicant has declared it, they will be conditionally passed and recommended to pay rent upfront, secure a satisfactory guarantor or not be liable for rent.
If it is satisfied but that applicant did not declare it beforehand, they will be recommended as an unsatisfactory applicant.
CCJs over £5,000
The applicant will be recommended as an unsatisfactory applicant.
However, applicants who are upfront about this adverse credit may have it overlooked depending on the situation and upon further discussion.
Insolvency Solutions (IVAs, DROs and bankruptcy)
If this adverse credit is still active, the applicant will be recommended as an unsatisfactory applicant.
If this adverse credit was satisfied more than a year ago, and the applicant has declared it, they will conditionally pass subject to them paying rent upfront, not being liable for rent or securing a satisfactory guarantor.
If this adverse credit was satisfied in the last year, the applicant will be recommended as an unsatisfactory applicant.
However, applicants who are upfront about this adverse credit may have it overlooked depending on the situation and upon further discussion.
Will the check affect applicants’ credit score?
The checks will not impact applicants’ credit rating as they are soft verification checks.
Can applicants run their own credit checks?
If applicants want to run their own credit check, they will have to register with Equifax. If they have paid off any adverse credit, it takes between six to eight weeks to see an update on the database. This means that Goodlord will not be able to see an update on Equifax before that time. If they have proof of satisfaction of any adverse credit that they believe is affecting the recommendation, they can upload this proof for review.
What does a conditional pass mean? What warrants a conditional pass?
There are a number of scenarios that can lead to a conditional pass for applicants. Most are minor and are no cause for concern; some may require applicants to pay rent up front; that they're not liable for rent; or that they secure an acceptable guarantor.
The applicant’s address was unable to be verified
The applicant did not live in the UK in the past 6 years
The applicant has adverse credit
5.Income and affordability explained
An applicant’s income is assessed in order to check that they are capable of covering the costs of the rent for the duration of the tenancy. The same assessments are applied to guarantors to make sure they can pay in the event that the tenant defaults on payments. A measure called an affordability ratio to make this calculation. The affordability ratio differs between applicants and guarantors.
An affordability ratio is a comparison of an applicant's income to the prospective rental amount. Under the Goodlord criteria, an applicant must have an AR of at least 2.5, whilst a guarantor must have an AR of at least 3.0 to pass. This means that for an applicant and guarantor to pass, their annual income must be at least 2.5 and 3.0 times greater than the annual rent, respectively.
Example: John earns £25,000 p.a. The maximum annual rent he can afford is £25,000 ÷ 2.5 = £10,000 per year The maximum monthly rent he can afford is £10,000 ÷ 12 = £833.33 per month
Income referencing depends on applicants’ sources of income:
Permanent, fixed-term or temporary employment contract.
Future employment and referencing.
Self-employment. (inc rental income and company directors)
6. Residential history check explained
If an applicant is currently renting, they will need to confirm their current landlord or letting agent’s name, email, and phone number. The landlord or letting agent will be contacted to confirm:
Your tenancy start and end date.
Your notice period (if there was one).
If rent was paid on time.
If there were any property damages.
If an applicant cannot provide their landlord/agent details, they must attach their previous tenancy agreement (AST) and bank statements for the last three months. This is to see if rent has been paid consistently for the last three months.
What if I’m not renting?
Goodlord will not contact your friends or family, student halls, employer or short term accommodation provider to ask for a reference for your residential status. Further investigation and discussion is required, depending on the circumstances.
Other things to consider
References are kept open for five working days (seven days including weekends)
If an applicant was renting with multiple people and the payment was made by one person, that can accept that as proof of paying rent. To verify this, the last three months of bank statements of the person paying the rent alongside the AST (tenancy agreement) will be required.