Renting With Bad Credit | Don’t Let Credit Get in the Way of Renting

Want to Start Renting?

When you start the process of flat hunting, you’ll find that nearly every private landlord you find will ask for a reference, and in this reference will be a request for details about your credit history. Now, this can feel like a bit of a hassle but landlords simply want to know how well they can trust this new tenant moving into their property to pay their rent on time. 

However, this creates a bit of a problem for a lot of people. If you’re completely new to renting and haven’t rented a property before or you’ve just begun thinking about credit and are looking to build it up, or you have a poor credit history, how are you supposed to earn a landlord’s trust? 

Not to mention the fact that there are even more demographics that a landlord might turn their nose up at, such as: international students and foreign workers who want to rent a place whilst working here. Neither of these groups are likely to have any renting or credit history in the UK. 

Finding a property to rent is evidently a shared struggle for lots of people but in this article we’ll look at what you can do if you’ve failed a credit reference check but want to find a new flat or home.

Be Upfront with Landlords

This is a great first step for a situation like this. If the landlord is going to be able to see your credit score during their checks anyway, it’s best to be open and honest about it. Moreover, definitely let them know before they find out. This is a vital introduction and will make them perceive you as a much more trustworthy tenant. 

Also, it’s worth noting that there are times when bad credit isn’t even an indication of bad money management. It could have been something that was out of your hands: being made redundant, dealing with medical problems, someone else’s actions that pushed you back financially. Again, there’s no shame in being upfront about these things before the landlord runs the credit check, and it will be to your benefit. 

Additionally, it’s good to be able to show what steps you’re taking to rectify the issue. This will again indicate to the landlord that you’re a responsible person who is serious about renting the property, even if your credit could be improved. 

Find a Guarantor for your Rent

Okay, so you were honest about the bad credit with your landlord but you still need a solution. Option number one: get someone to be your guarantor. Letting agents and landlords will be happy to rent a property to you if you have a third party with a good credit score who agrees to be your guarantor. 

This can be any friend or member of your family. They’ll be requested to sign a guarantor document that puts them under the obligation of paying your rent if you fail to. This includes any potential rent arrears – missed rent, and also any damage that you could inflict on the property. 

Suffice to say, this is a very weighty role for someone to have and needs a lot of thought before taken on. Remember this will be someone who is jointly responsible for paying the property’s rent, as well as covering any damages. 

Alternatively, if you don’t have anyone that is suitable for this role, or willing to take it on, there are some other guarantor options out there. Rent guarantor services are an available avenue to go down. This is a company who will act as your guarantor for you. The prices will range depending on the company but expect a cost of around £300 for their services. 

Additionally, you’ll be asked to sign a contract called a ‘guarantor deed’. Most rent guarantors will request proof identity and salary, and insist that you earn at least 1.5 times your rent. So, if your rent is £500/month, your income needs to be at least £750/month. 

Check how you can Improve your Credit History

Ok, I know what you’re thinking, “well, duh” but hear me out. I can’t neglect the option to stay in your current accommodation and work on improving your credit score. 

What actually affects a credit score?

Variables that lead to a higher credit score consist of: payments being made on time, keeping low balances on your credit cards, having a mixture of different credit card and loan account, having credit accounts for a longer period of time, and a minimal amount of inquiries for new credit. 

What can hurt your score? 

Payments that are late or have been missed, high balances on your credit cards, collections, and judgements are all big offenders for lowering credit score. 

The time it takes to improve your credit history can vary, however, according to Experian, it can take at least three months for new and updated information about your credit score to register in the system. In light of that, it’s a good idea to give yourself at least half a year to accrue new credit history that will improve your score. 

Advance rent payment

An effective way of avoiding the guarantor system is agreeing to pay your rent in advance, often in a lump sum somewhere between six and twelve months’ rent. Remember I mentioned international students before? This is a way many of them use to get a place in the UK.

However, having six months rent on your person, ready to pay, might not be a very likely scenario. That much money is hard for most younger or credit-impaired tenants to come up with. A last resort here could be to ask a friend or family member to lend you the cash needed to pay your rent in advance. 

Another option is to offer a two-month security deposit which can help ease the landlord’s worries. You’re killing two birds with one stone by showing your commitment and giving them extra money that can cover any potential losses or damages, in the event you missed any rent. 

Join a Common Rent Property 

Happy to share a living room and kitchen with some other people? Another alternative for you to consider is to find joint tenancy accommodation or ‘common rent’. This is another method that can get around the need for credit referencing. The reason for this is that if you find a place with a few existing tenants who are looking for someone to fill a space, they are all responsible for the rent and so the landlord might be content with you moving in without a credit reference. As long as all of the tenants agree, of course. 

Rent with a Roommate 

Similarly, you can always find a roommate to rent a property with. A possibility that this opens up is if the landlord only needs one person to sign the lease, you can check if your roommate is willing to do it themselves. You can also try and move-in with someone who’s half way through the lease too! This means that the person on the lease will be the one with better credit. 

The other plus side to roommates is splitting the bills. This may help you bring down your financial burden a little and this way, further pay off your debt and improve your credit score. 

Bond Guarantee Scheme

A bond guarantee scheme is where the council or a charity act as your guarantor for your renting situation. They’ll pay your rent if you’re unable to and cover any damage that is ever inflicted on the property. These schemes have been put in place to help those most in need back into the renting market. Usually, they’re made for people who are on the verge of becoming homeless to help them find a place, so they may not be eligible for everyone. 

Being Open to Changes

When renting with bad credit, it might sometimes be wise to allow for a bit of compromise. For example, if the landlord makes some changes to your tenancy agreement before it’s signed, it might be good to let it slide. Now, definitely be careful and know what it is that the landlord is doing and if it’s simply so that they can further protect themselves. What I’m not advising you to do is to be taken advantage of by a landlord. Rather, make yourself appear as an agreeable tenant who won’t be causing them too much problems down the line. 

Build Rapport 

On top of being amiable, let the landlord get to know your character. For some landlords a bad credit history might be quite off-putting. However, you build their trust by showing that you’re enthusiastic about the property and being a good communicator. This entails being timely and efficient in your responses and remaining friendly overall. 

This should mean that the landlord has no reason to doubt your potential as a great tenant. After all, good credit doesn’t automatically mean that someone will pay their bills on time. 

Showing a Steady Income

Though your credit score might be on the lower side, showing that you currently have a steady income can build up a landlord’s confidence in your role as a tenant. Proof of income can look like payslips, tax returns, and a letter from your employer that verifies your job role and income. 

What might also help is to offer to have your rent automatically taken from your bank account. 

Supply References

Whilst this might just be something you reserve for a job application, bringing some references to your flat searching may come in handy. A reference can help convince a landlord that you’re a trustworthy person who they can rely on to be a good tenant. You can get a reference from your boss or your previous employers, perhaps other landlords you’ve had, or past roommates can recommend you as a tenant. You may not have had these tenancies for long but a recommendation from a previous landlord can be very effective. 

You can still Rent with Bad Credit

I hope that you find these tips helpful and that you’ve been reassured that though your credit might be lower than you’d like it to be, there are still ways of getting around this when renting. Be it spending a little on a guarantor service or going for more feasible and practical steps like sharing with a roommate.