Why tenants need to keep a keen eye on their finances...........
Have those Christmas gifts taken their toll on your bank balance? Have those seasonal tipples been giving you a rosy outlook on your finances? If you’re thinking of renting, or your tenancy will be coming to an end in 2017, you need to start casting a keen eye over your finances.
In April 2014 a series of reforms were introduced into the UK mortgage market through the Mortgage Market Review (MMR), nicknamed the ‘stress test’. The MMR arrived to strengthen affordability assessments for those seeking a mortgage, to prevent them from taking on an unaffordable financial commitment, and also ‘testing’ to see they could afford the repayments should interest rates rise in the future. The MMR allows lenders to look into your financial situation like never before, this includes each transaction made across your accounts, such as how often you go out for dinner and other spending habits.
According to research by the credit reporting service Clear Source, an incredible 62% of landlords questioned stated that a prospective tenant’s credit score was the most important factor when deciding whether to approve their tenancy application or not.
Credit scores are used by multiple sectors to ascertain your financial status, such as when you apply for a credit card, purchase a car on finance, or even when paying your bills. According to the loan company Amigo Loans, who conducted a survey of 2000 people, 63% didn’t realise that insurance providers run checks before setting up monthly plans, and 56% never realised that energy firms also check your credit score before setting up a direct debit for payments for gas and electricity.
Glen Crawford, Chief Executive of Amigo Loans, stated on thismoney.co.uk: 'Thousands of people are completely oblivious to the fact big institutions are checking their financial trustworthiness. The days when you would only be checked for a mortgage or a loan are long gone. What’s really worrying is that people could be inadvertently destroying their own credit score, and as a result may be closing the door on life dreams like home ownership.”
Each action you undertake places an imprint on your credit report, whether that’s positive or negative, thus affecting your credit score. Just like when you apply for a mortgage, landlords just want to ensure that you can afford the rent consistently throughout the year.
When your finances may be more depleted at the start of the year, there is no better time to get things on the right track. Ensure you regularly check your score and follow the credit reference agency’s advice on how to improve it. Also, bear in mind your actions, and things that can affect your score, such as unnecessary searches on your credit file, missed and late payments.
We always ensure our process for renting a property is transparent at all times, and take you through the necessary checks that must be undertaken.
Start 2017 with your credit score in mind, and keep a close eye on your finances.