Why landlords and employers want to see your credit file

By Emma Lunn

Mortgage lenders, loan providers and credit card issuers see your credit reports, but did you know that landlords and potential employers might also want to take a peek?

Here's what they're looking for -- and what they are allowed to see.

Landlords
Landlords and lettings agents will want to see if potential tenants can afford the property in question and whether they have any county court judgments (CCJs) or bankruptcies. However, there's a limit to the types of information they can see about potential tenants. credit-check

Unlike lenders and card issuers (which are actually extending lines of credit), those renting out property can see only the parts of a credit report that are part of the public record, says Neil Munroe, external affairs director of credit reference agency Equifax. That includes the edited electoral role (to verify identity), any record of bankruptcy or repossessions, and CCJs.

Because you're not taking on financial risks by renting a home (like you would if you were applying for a line of credit), a credit check from a landlord won't ding your credit like one from a card issuer or lender would.

"The search record that is added to the consumer's credit file to show that it has been accessed will be different to a normal credit search to ensure that it has no impact on their ability to access credit," Munroe says.

Will a potential landlord be able to see if you paid your previous landlord on time? At this time, no. While information about mortgages is included on more extensive credit reports, rent payment information currently isn't. This means that those living in a privately rented property who pay rent on time haven't seen that information registered on their credit reporst. But this could soon change.

In March 2012, Experian, another credit reference agency, announced it will soon be launching what it calls the Rental Exchange. This will allow tenants to give Experian permission to include their rent payment history in their credit reports. In theory, tenants who pay their rent on time will be able to improve their credit scores, helping them qualify for better credit deals. Landlords, meanwhile, will be able to see if potential tenants have paid their rent on time and in full to previous landlords.

Employers
Employers in some sectors will look at an applicant's credit record before offering them a job or even an interview. This tends to apply to the financial services sector or other jobs that involve dealing with money. Not all employers will check your credit, yet red flags (like CCJs and bankruptcies) in your report could cause you to miss out on an opportunity.

Employers won't have access to everything in your report, and their credit checks won't harm your credit. They will, however, be able to see the public-record information landlords can see to verify your identity and ensure you handle money responsibly.

"But it's important to remember that before carrying out a check, any organisation must inform the individual that they plan to do this," Munroe says.

That gives you time to fix things before an employer sees something unflattering in your report or perhaps explain in more detail to your future employer any previous mishaps. Check your report for mistakes. If the worst things in your report are not mistakes, however, you can contact the credit reference agencies ( Experian, Equifax and CallCredit) and ask them to allow you to explain the circumstances behind them. If they were due to hardship, a potential employer may give you a second chance.

See related: The five basic components of a credit score, Credit counsellors share consumers' biggest credit  mistakes

Published: 3 July 2012