How to Let to Tenants Who Failed Referencing

Finding Tenants • 29 Apr 2026, 15:48

How to Let to Tenants Who Failed Referencing

In the 2026 rental market, selecting the right tenant has become the most significant decision a landlord makes.

With the Renters’ Rights Act now fully active, the abolition of fixed terms and Section 21 evictions means that every tenancy is a “long-term” commitment from day one.

If a tenant fails a referencing report or credit check, it doesn’t automatically mean they are unsuitable, but it does require a more vigilant approach to risk management.

Understanding why a tenant failed and knowing your legal options, including the strict new limits on rent in advance, is essential to staying compliant while protecting your investment.

What does referencing tell me?
4 common reasons tenants fail referencing
What should I do if my tenant fails referencing?
Rent Guarantee Insurance and Zero Deposit schemes

OpenRent lets you reference guarantors as well, giving you extra reassurance when a tenant fails standard checks.

Start Full Referencing

What does referencing tell me?

Referencing is your primary tool for verifying an applicant’s eligibility, affordability, and reliability before you enter into an Assured Periodic Tenancy (APT).

A comprehensive report offers a multi-layered view of the tenant, including a credit check to identify financial red flags, employment and income verification to ensure they can meet the monthly rent. Plus, a previous landlord reference to assess their conduct in a domestic setting.

Referencing reports are also vital for showing the Private Rented Sector Ombudsman (once it becomes operational) that you have performed due diligence should a dispute arise later.

4 common reasons tenants fail referencing

1) The affordability calculation

In 2026, affordability is the most common hurdle. Referencing agencies typically apply a multiplier (usually 2.5x or 3x the annual rent) to determine if a tenant has enough financial “breathing room”.

You must remember that under the Renters’ Rights Act, you cannot discriminate against tenants who receive Universal Credit or other benefits.

At OpenRent, our affordability checks include all legitimate income sources, including benefits and student funding.

If a tenant fails this check narrowly, you may still choose to proceed, but you must be aware that rent in advance is now strictly capped at one month.

You can no longer ask for 6 months’ rent upfront to “offset” a low income; instead, adding a UK-based guarantor is an option many landlords choose, alongside Rent Guarantee Insurance (RGI).

2) Adverse credit history

A tenant will often fail referencing if they have a County Court Judgement (CCJ) on their record. A CCJ indicates that a court has previously ordered the individual to pay a debt which they failed to settle.

While some landlords choose to overlook older or very small CCJs (for example, a disputed mobile phone bill from several years ago), you must remain cautious. Because you can no longer end a tenancy without a specific ground, taking on a tenant with a history of failing to honour debts is a higher risk than it was in the past.

3) Lack of credit history

It’s quite common for perfectly suitable tenants to have no credit footprint at all. This is frequently seen with international applicants moving to the UK for work, or young renters and students who have previously lived at home.

A “no-score” result is not the same as a “bad score”, but it does mean the referencing agency cannot verify financial reliability through traditional means.

In these cases, it’s standard practice to look at the report in full and speak to the applicant. Most landlords in 2026 manage this risk by requiring a guarantor who does have a settled UK credit history, providing the security that the credit report itself could not offer.

4) Poor lettings history

A reference from a previous landlord is traditionally viewed as the most revealing part of a report, but it must be treated with a degree of scepticism.

With the abolition of Section 21 evictions, some landlords may be tempted to provide an untruthful, positive reference for a problematic tenant simply to facilitate their move and avoid a potentially lengthy Section 8 court process.

To protect yourself from this tactic, you should never rely on a written reference in isolation. Instead, use it as a cross-referencing tool against hard evidence, such as Open Banking records, which can verify if rent payments actually left the tenant’s account on time and in full every month.

If a glowing reference contradicts the financial data or reveals unexplained gaps in a tenant’s address history, it’s a clear sign that you need to perform deeper due diligence before committing to a tenancy.

What should I do if my tenant fails referencing?

Proceeding with caution

If you choose to proceed despite a failed report, perhaps because the failure was a minor affordability gap or an explained, old debt, you are free to do so.

However, you should be aware that most Rent Guarantee Insurance (RGI) policies will only provide cover if the tenant passes or has a qualified guarantor who passes. If you move forward “as is”, you are essentially self-insuring the risk of any future arrears.

Requesting a guarantor

For many, the guarantor has replaced rent in advance as the landlord’s primary security. A guarantor signs the same tenancy agreement as the tenant and becomes legally liable for the rent and any damages.

This is the most compliant and effective way to accept a tenant who has failed one aspect of referencing, as it provides a secondary source of income for you to claim against if needed.

If a tenant fails referencing, consider strengthening the application by checking their guarantor’s income and credit history too.

Run Full Checks

Cancelling the application

If the referencing report reveals risks you are uncomfortable with, you are entitled to cancel the application.

Regarding the holding deposit, you must follow the rules strictly: you generally must refund the deposit unless the tenant provided materially false or misleading information.

A simple failure on affordability or credit is usually not enough to justify keeping the deposit; however, if the tenant lied about having no CCJs or falsified their income, you may have grounds to retain it to cover your costs.

Rent Guarantee Insurance and Zero Deposit schemes

You need to be careful with the eligibility rules for Rent Guarantee Insurance (RGI), as they act as strict “gatekeepers” for cover. Our RGI is only available where every tenant on the agreement has passed ID verification and has not failed their credit checks.

If an applicant fails a credit check, for example, due to a County Court Judgment (CCJ), the tenancy will not qualify for RGI, even if a guarantor is offered. From an insurer’s point of view, a failed credit check signals a level of risk that cannot simply be offset by a third-party guarantee.

In practical terms, if you proceed in this situation, you are effectively self-insuring, meaning there would be no claim payout under the policy if rent stops being paid.

There is, however, a route forward where applicants are financially stretched but otherwise suitable. If they pass ID and credit checks but fail affordability checks (the income-to-rent ratio), the tenancy can still qualify for RGI if a guarantor is added.

In these cases, the guarantor must be fully referenced, pass all checks themselves and show they can comfortably cover the tenant’s full rental liability.

Making sure these conditions are met before the tenancy starts helps protect your ability to rely on the insurance and supports a more predictable income in a market where recovering possession has become more complex.