Tenant referencing is the process of verifying that a prospective tenant can afford the rent, has a history of paying on time, and has no county court judgements or financial flags that suggest a future arrears risk. A thorough reference check is the most effective way to reduce possession risk — and is typically required by rent guarantee insurance policies.
What tenant referencing covers
- Credit check: Searches the tenant's credit file for County Court Judgements (CCJs), defaults, bankruptcy orders, and payment history. A CCJ in the last 3 years or an undischarged bankruptcy is a significant red flag.
- Employment verification: Confirms the tenant is employed (or self-employed), their employer's name, their annual salary, and the nature of their contract (permanent vs. temporary or zero-hours).
- Affordability check: Confirms that the rent is affordable relative to income. The standard test is that gross monthly income should be at least 2.5× the monthly rent (i.e. rent should not exceed 40% of gross income).
- Previous landlord reference: Contacts the previous landlord to confirm rent was paid on time, no complaints, and the property was left in good condition.
- Right to Rent: Confirms the tenant has the legal right to rent in the UK. Required by law for all tenancies in England.
How to conduct referencing
There are three main approaches:
- Professional referencing company: Services such as Homelet, Let Alliance, or OpenRent Referencing conduct all checks and provide a pass/fail report. Cost is typically £20–£30 per applicant. The most reliable and audit-trail-friendly approach.
- Letting agent: If you use a letting agent, they typically conduct referencing as part of their tenant-find service. Check what checks are included and whether they meet the threshold required by your rent guarantee insurer.
- DIY referencing: You can conduct checks yourself, but employment references are easy to fake and credit checks require a registered search. DIY referencing is rarely sufficient for rent guarantee insurance purposes.
Affordability rules
The standard affordability test is that gross annual income should be at least 30× the monthly rent (equivalent to 2.5× the annual rent). For a £1,000/month property, the tenant should earn at least £30,000 gross per year.
Where a tenant cannot meet this threshold alone, options include:
- Guarantor: A creditworthy person (usually a parent or employer) who guarantees the rent if the tenant defaults. The guarantor should be referenced to the same or higher income standard.
- Advance rent: Accepting 3–6 months' rent in advance from a tenant who cannot pass affordability. Note: advance rent does not count as a deposit under the Tenant Fees Act, but exceeding 5 weeks' deposit cap still applies.
- Rent guarantee insurance with higher excess: Some policies will accept a lower affordability score in exchange for a higher excess or lower payout cap.
What to do if referencing comes back unsatisfactory
- CCJ or default: Consider the value and age of the CCJ. A small, satisfied CCJ from 4 years ago is different from a recent large default. You are entitled to refuse without giving a reason.
- Employment cannot be verified: Ask for alternative evidence — 3 months' payslips, bank statements, HMRC SA302 (for self-employed). If no evidence is forthcoming, decline.
- Income too low: Offer a guarantor option. If no guarantor is available, this is a legitimate reason to decline the application.
- Previous landlord gives a negative reference: This is the single most reliable predictor of future problems. A negative reference from a previous landlord should generally result in declining the application.
Discrimination and fair referencing
From 1 May 2026, the Renters' Rights Act 2025 prohibits blanket refusals of tenants on housing benefit (DSS) or with children. You must apply referencing criteria consistently. An income threshold that disproportionately excludes housing benefit claimants who cannot pass a gross income test may be unlawful if you do not offer a guarantor or advance rent alternative.
- Apply the same referencing criteria to every applicant
- Do not refuse based on protected characteristics — disability, race, religion, family status
- Do not refuse based on benefit status (DSS) — this is unlawful discrimination from 1 May 2026
- Document your referencing decision and the basis for any refusal — this protects you if challenged