How to rent a house with bad credit

Renting a house with a bad credit score can be hard, however,  there are ways around this and as a tenant, you should use this to your advantage if you know your credit report is disadvantageous.

In this article, determining what is classed as bad credit will be talked about as well as if you can improve your score to gain approval for a tenancy.

Tips don’t just concern improving your credit score either as there are other things you can do like finding a guarantor, trying to compensate with landlord references and providing further evidence of income.

If this is something you are struggling with as a tenant, it is in your best interest to read this article in its entirety.

Bad credit is something a lot of landlords have to dismiss tenants for and may lead them to go with a rent to rent company instead and choose not to deal with tenants at all

What is considered bad credit?

A bad credit score is dependent on the credit referencing agency you have signed up with.  There are three credit referencing agencies including Experian, Equifax and TransUnion. However, bad credit refers to someone’s entire credit history which is based on a credit report and a credit report uses a lot more factors than a credit score.

For example, someone with bad credit may have a poor credit score but they also may be employed with a decent history of paying off direct debits. However, someone else could have a better credit score but they may have taken out a lot of loans and they may be earning a lot more than another person.

Both of these people are classed as having bad credit based on their report but they have different credit scores. This shows how a credit score is only a part of someone’s credit history and the landlord will still need to do a wider referencing check to find “bad credit” according to their standards.

Experian credit scores are considered poor if they are in the range of 561 – 720. Where Equifax has a score that is considered poor of 439 to 530 and TransUnion has a poor category of 561 to 565.  As you can tell, if you do not understand that each credit referencing agency has their own scores it can be confusing what a bad credit score actually is.

How can I improve my credit score before applying for a rental property?

As you know, maintaining a good credit score is essential for renting as it is one of the first things landlords look at when trying to find new tenants. There is hope if you have a bad credit score as a tenant though as the below steps could dramatically improve it.

Some of these things improve a score quickly whereas others require a longer period of time.

Check your credit score

It is important to check your credit report first of all and before anything else. If you sign up with a credit referencing agency you can begin making changes straight away. You cannot make improvements without knowing where you are starting and the good thing is a lot of these agencies give their own prompts and advice on how to improve your score as you sign up. 

For example,  they may tell you to start making direct debits on a bank account, they may tell you what banks have overdrafts or what joint bank accounts are currently in use.  

It could be that a bank account that hasn’t been used for years but is still in your name is what is bringing down your credit history. So first, pick the low hanging fruit and make the quick changes that can boost your credit score with ease.

You can also register with financial services websites such as MoneySuperMarket which you can find here. They work with credit referencing agencies to find your score and also advice can be given on their online platforms.

Avoid taking out any more loans

Avoiding loans is an obvious answer but you may not know that if you even apply for a loan your credit score can take a hit.  If you apply for a loan and they conduct a hard credit check and multiple hard credit checks are done on your credit report in a short period of time,  this can be a reason for your credit score to decrease.

So while you may think taking out a credit card or loan to improve your credit rating as you prove that you can pay it off is beneficial, make sure you are likely to be approved in the first place and do a lot of research so you know what to apply for.  Multiple hard credit checks from multiple loan applications indicate desperation and instability on a credit report.

Register to vote

Registering to vote is a quick way to increase your credit score in the private sector. The simple act of registering on the government website here will tell credit agencies that you have positively contributed to the economy and are seen as a good citizen with a stable lifestyle.

What credit score do you need to rent in the UK?

Renting with bad credit is never an advantage. Nonetheless, you may be able to get away with it if you use other methods of showing a landlord that you are able to pay the rent on time.

Is there a minimum credit score needed to rent?

There are no minimum credit scores needed to rent in the UK as each landlord will have their own tenancy referencing process and this may go up or down depending on the tolerance for risk that the landlord wants to take.

Usually, in order for a tenant to pass credit referencing checks, they have an Experian credit score of around 638 on average. Read this article here to find out more about this study that compared the average credit score of renters.

What does a tenant credit check look at during a tenancy screening?

Tenant referencing is what every letting agent or landlord does as they decide if a tenant is good enough to let in their property. These checks include:

• If a tenant has the right to rent in the UK
• Proof of employment for a tenant
• Asking for a landlord reference
• Conducting a credit report check (hard or soft) 

However, there are instances where it is illegal to deny a tenant access to a property for certain reasons as they are considered discrimination. This may include the age, gender or sexuality of a tenant.

Also, basing approval on how they choose to live their life, different religious beliefs, race or if a tenant has a pregnancy or a child are also considered discrimination.

Finally, if a landlord refuses access to let a DSS tenant, this could be punishable by a fine through a court order or if the tenant is disabled with a health issue this is also considered immoral.

Having said this, it is very hard for a landlord to be convicted as a tenant cannot easily prove the reason why they weren’t let into a property unless a landlord overtly says that they aren’t accepting a certain type of tenant.

Therefore a lot of landlords provide alternative reasons for choosing specific tenants and carefully avoid the question of what type of tenant is most suitable for their home.

Tips for renting a house with bad credit

There are a few things you can do as a tenant to improve your chances of letting a property if you knowingly have a bad credit report. You do not have to give up as many tenants rent their property but do not have the best credit report.

It may be that you have to find a place temporarily while you build your credit history so you can eventually move to a better place in the future. So, even if none of these tips work, do not give up as the right place for you to rent may not be that far away.

Find out your credit rating

As a tenant goes through a tenancy reference process, a landlord may ask them to conduct a hard check following their look at a soft check to see if there is anything else to be learnt about a tenant’s credit history.  This would give them the opportunity to only allow a soft credit check.

For more on how this works, you would need to know more about tenant credit reports but a hard check can be rightly refused if you feel like you have had too many in a short period of time as this may impact your credit score.

Be upfront with the landlord about your credit situation

If you bring up the credit report straight away during referencing, you may give the landlord peace of mind that you are not lying and you are being overt with how risky you are as a tenant. While this may result in you being rejected straight away, you can move on quickly to find another property.

If you use this method, you would hope for a landlord to be understanding and perhaps have a higher risk tolerance. This could be the case if the landlord knows that the rent will be paid in a HMO. These tenancies are considered less risky as there are multiple tenants that pay rent so it is unlikely a landlord will default on mortgage payments as they have other rents to cover the cost.

In other cases, some landlords will simply just be more accepting as there is no one-size-fits-all tenancy referencing process, especially when it comes to private landlords and those with lower rents.

Consider getting a guarantor to co-sign the lease

Getting a guarantor is one of the easiest ways to rent with bad credit because it provides a guarantee that landlords will receive rental payment if you cannot pay as a tenant.  This is common for students or those who have a lower income.

This is an acceptable way for tenants with poor credit to gain approval to rent a property.  The trouble is finding the right guarantor for those who do not have one. In order to find a guarantor for renting, read our article on rent guarantors.

Allow the landlord to make changes to the tenancy agreement

Sometimes, a landlord could allow you into their property but with specific terms. They may say you have to have something smaller in a property or they could ask for a larger security deposit.

Being open to these changes within reason and within the laws can help you gain approval for a tenancy agreement.  It is useful to note that a landlord cannot charge more than 5 weeks of the rent as a tenancy deposit so make sure they do not exceed this figure.

Offer references from previous landlords or employers

Landlord references are one of the most important ways new landlords can figure out what kind of tenant you are.  This may include if you are a tenant who has previously had rent arrears or if you are considered  rude or you had disputes while a tenancy was in place.

This would also give a landlord a good idea of if you make excessive demands while in a property or if you take care of the property too, reducing their risk of being sued by a tenant for unnecessary reasons.

Provide evidence of your income

If an income report is particularly short,  this can be a good reason to submit more history to a landlord.  Usually, a letting agent or landlord will only ask for 3 months of bank statements.  However, if you know that you had a better income before those three months you can show this as well alongside any savings you may also have.

This is an example of how you can give more details to show that you will be able to afford rent.

Pay rent in advance

Offering rent in advance to a landlord can be a great way to give them a better perception of your ability to afford the rent they are asking for.  Maybe 3 to 6 months of rent upfront as well as having your security deposit in place will give a landlord confidence their rental income will be paid.

To offer rent in advance, speak to your landlord about how much rent in advance they’re willing to take. Some landlords will ask for this anyway, especially if you do not have little to no history of personal income or you perhaps also have a guarantor in place.

Consider renting a room in a shared house

Excluded tenancies are where you rent a room in a shared house. These tenancies have the same standard enforced on them when it comes to tenant referencing. As a result, you could live in a property as a lodger and the landlord will likely not do the same level of background research on you.

This is not as good as it seems however,  if you are in an excluded tenancy,  you also lose your rights to the exclusive right of your home and you may also have to live with your landlord.

This enables a landlord to enter the room you are renting at any time and they only have to give you a reasonable notice to evict you. So, while an excluded tenancy is easier to gain approval for, they also do not provide the same level of security.

Consider Subletting

If you sublet through your landlord and you are on the tenancy agreement with the head tenant, you may be subject to the same level of tenancy referencing as them.  However,  if you go through the head tenant and ask to be in agreement with them only,  they may not do that same level of due diligence.

Especially if you know the tenant personally and they are a close friend or family member,  they will act as a guarantor to you and be liable for covering any rent that you do not pay without the same level of tenancy screening.

To Conclude

In conclusion, renting with bad credit can be challenging, but it is not impossible. By taking steps to improve your credit score, such as paying your bills on time and reducing your debt, you can increase your chances of finding a landlord who is willing to rent to you.

It can also be helpful to have a guarantor if you have bad credit or a larger security deposit to offer to show you are financially responsible. Finally, be prepared to be flexible and open to alternative housing options, such as renting a room in a shared living space as a lodger or a property managed by a head tenant in a subletting agreement.

You should be able to find a rental property that meets your needs and fits your budget, even with bad credit.